Supply is in crisis, cocoa inventory has sharply decreased to a historical low

Valentine's Day has arrived, but chocolate may be delayed.

Latest data shows that cocoa inventories at the two major commodity exchanges in London and New York have fallen to historic lows. Faced with a cocoa shortage and high demand for Valentine's Day, chocolate manufacturers are forced to seek alternative raw materials to maintain production.

Over the past year, the available cocoa inventory on the Intercontinental Exchange (ICE) London market has plummeted from over 100,000 tons to about 21,000 tons. Jonathan Parkman, co-head of agriculture at commodity brokerage Marex, stated:

"This is the lowest level we have ever seen, meaning the supply chain has no buffer, and the market is extremely tight."

Independent licensed warehouses in New York are also facing a critical inventory shortage. Parkman added that the total inventory in New York is currently about 90,000 tons, "which is incredibly low for this time of year."

The main reason for this situation is the consecutive poor harvests in major global producing regions. Due to adverse weather and pests, the output from the world's largest cocoa producers, Côte d'Ivoire and Ghana, has significantly declined. Since the beginning of 2023, cocoa prices have tripled, reaching the highest level in 50 years on the London market.

In the face of supply shortages, chocolate manufacturers have had to take countermeasures. According to the Financial Times, American chocolate giant Hershey last month applied to U.S. derivatives regulators to increase its cocoa purchase limit through the New York exchange to 90,000 tons, nine times the previous allowed limit.

The tight supply chain has also forced some manufacturers to reassess their chocolate formulations. A recent report from Japanese supplier Fuji Oil indicated a decline in industrial chocolate sales, while sales of alternatives have risen. The sales of compound chocolate (made by mixing cocoa powder with alternative fats) have also significantly increased. Marex's Parkman pointed out:

"Chocolate manufacturers are launching new products with increasingly lower cocoa content, replaced by other cheaper ingredients."

Of course, consumers are also having a tough time this Valentine's Day. Wells Fargo stated that in the U.S., the retail price of chocolate this Valentine's Day is one-fifth higher than last year. Moreover, in addition to facing higher prices, they may encounter smaller chocolate bars or changes in formulations.

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