Not so eggcelent: Easter egg prices surge due to cocoa shortage

Easter is soon set to wrap up, and during this period Britons are likely to have eaten roughly 80 million chocolate eggs. Consumers have faced a bitter reality this year, being shellshocked by surging Easter egg prices. The prices of some eggs have ballooned by 50% compared to last year. Others have simply reduced in size, being subject to so-called ‘shrinkflation’.

Underlying this reality is a global cocoa shortage that has driven up prices of the precious commodity. The per-tonne cost of cocoa cracked US$10,000 a tonne this week, double the price two months ago. Chocolate producers have scrambled to compensate for this rise in their input costs by hiking their prices – since last year, chocolate prices have soared by 12.6% in Britain – double the rise in supermarket food and drink prices.

It is emblematic of the extent to which climate change is undermining global food security

The shortage’s roots lie in West Africa, particularly Ghana and the Ivory Coast, which produce over ½ of the world’s cocoa. The undersupply problem stems not only from unique factors afflicting this year’s cocoa supply but also from broader structural issues that look set to keep prices high for the long haul. Importantly, it is emblematic of the extent to which climate change is undermining global food security alongside just how reliant global supply chains are on exploitative practices.

To put it plainly, West African weather has been really, really bad this year. Climate change and the El Niño phenomenon have caused abnormally hot and humid weather. Heavy rainfall has left cocoa vulnerable to ‘pod rot’ – a disease that causes discolouration of cocoa pods and leaves them unfit for use. Moreover, a heat wave, with temperatures last month frequently exceeding 40°C, has deprived cocoa crops of the moisture they need to grow. A study by World Weather Attribution, a group of climate-oriented academics, has found that manmade climate change made last month’s West African heatwave 10 times more likely and 4°C hotter. Finally, cocoa producers have been blighted by seasonal ‘Harmattan’ winds that deprive cocoa trees of much-needed sunlight and diminish bean quality. The result of all of this has been an 11% reduction in cocoa yields globally, which has flipped the market upside down.

The average annual household income for an Ivorian cocoa farmer is US$1,900, well below the World Bank’s poverty line

This is only part of the story, though. Long-term structural issues plague the cocoa industry, particularly sustained underinvestment – a product of chocolate companies’ exploitation of cocoa farmers. The average annual household income for an Ivorian cocoa farmer is US$1,900, well below the World Bank’s poverty line. Not only does this encourage farmers to engage in unethical practices, such as using child labour, but it leaves them with little revenue to devote towards investment, whether it be in planting new trees or fertilisers. The implications of this are dire. Most cocoa farmers have not planted new trees since the early 2000s, with older trees they rely on being more vulnerable to disease and weather fluctuations. Furthermore, cocoa is an incredibly sensitive plant, and whilst newer varieties of seeds are more resilient, farmers simply cannot afford to procure and plant them. The result is sustained undersupply, with cocoa farms more exposed to the effects of global heating.

These high prices are not a problem that is going away anytime soon

Whilst one might expect surging cocoa prices to benefit farmers – leaving them with more revenue to finance investments, this has not happened due to public policy. Governments of both the Ivory Coast and Ghana set a fixed price for cocoa based on last season’s prices. Whilst this limits price volatility, it precludes farmers from taking advantage of recent market developments by raising their prices.

Moreover, whilst consumers are feeling the pinch, their situation is only set to worsen. Chocolate companies procure cocoa by purchasing cocoa futures contracts, where they agree in advance to buy a set quantity of cocoa at a set price and at a predetermined future date. With these futures contracts having been negotiated by chocolate companies before the recent price surge, these firms have not yet been fully exposed to the cocoa price shock. This means chocolate prices are likely to increase further, with consumers only likely to experience the full effects of the cocoa shortage by the end of this year.

As the demand for chocolate consistently grows while its supply is set to remain volatile, these high prices are not a problem that is going away anytime soon. With the effects of the climate crisis and low investment looming large, one can only hope that global efforts take place to facilitate climate action and establish fairer agreements between chocolate companies and cocoa farmers.

Maybe then, we can end this story on a sweeter note.