Tuesday, 20 February 2024 Reading time : 2 minutes

The situation in the cocoa market remains tense. In mid-February a tonne of cocoa beans cost more than USD 6,000 on the New York futures markets, reaching an all-time high. The rapid rise in prices was partly due to erratic weather conditions in the main cocoa growing regions, which led to crop failures. As a result, the value of the main raw material used to make chocolate has more than doubled within a year.

Most cocoa beans are harvested in West Africa, with the Ivory Coast and Ghana accounting for around 60% of global production, according to the International Cocoa Organisation (ICCO). The two neighbouring countries, which border the Atlantic Ocean to the south, are feeling the effects of the El Niño weather phenomenon. Heavy rains and dry winds, as well as plant diseases, are affecting the quality of cocoa beans and reducing yields in the current harvest season, which lasts until March.

Yet, the prices of Lindt's golden Easter bunnies, which are already in the shops, do not yet reflect the sharp rise in commodity prices. As cocoa traders hedge on the futures markets, it usually takes six to twelve months for higher costs to have a noticeable impact, according to analysts at data provider Bloomberg. Companies such as Lindt & Sprüngli, Nestlé and US-based Mondelez, which makes Toblerone chocolate bars, are likely to draw on chocolate stocks bought at lower prices.

However, rising raw material costs could be filtered down the supply chain as inventories are reduced. Swiss company Barry Callebaut, one of the world's leading cocoa traders, said it had passed on some of the price increases to its customers, according to Reuters. Barry Callebaut supplies chocolate to companies such as Nestlé and Unilever.

The coming months will show to what extent chocolatiers and food companies can increase the price of their products without consumers cutting back on chocolate and confectionery. According to the US weather service Climate Prediction Center, El Niño is expected to weaken during the spring. The recovery of cocoa plantations and the stabilisation of the market situation will probably take some time though. 

Structured products on cocoa and chocolate producers

7.50% p.a. Barrier Reverse Convertible on Nestle, Barry Callebaut, Lindt & Spruengli, Mondelez International
Valor: 132910590

7.00% p.a. Callable Barrier Reverse Convertible on Nestle, Barry Callebaut, Lindt & Spruengli
Valor: 132910589

Indicative terms

 

Disclaimer
This communication is for marketing purposes. It is neither an offer nor an invitation to submit an offer, to purchase or to subscribe to securities and does not constitute investment advice. You should consult your advisors before making an investment decision.
Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, financial condition, development or performance of the issuer to be materially different from any future results, financial condition, development or performance expressed or implied by such statements.
The present document has not been drawn up by the research department as defined in the rules of the “Directives on the Independence of Financial Research” published by the Swiss Bankers Association, hence these rules do not apply to this document.
If securities are mentioned in the communication, the base prospectus, the final terms and any key information document may be obtained free of charge from Zürcher Kantonalbank, Bahnhofstrasse 9, 8001 Zurich, VRIS, and from www.zkb.ch/finanzinformationen.