SEOUL, South Korea—The international market price for cocoa beans has plummeted, dropping by nearly 50% from its peak and reaching its lowest level in 20 months. This dramatic reversal follows a two-year surge that saw prices for the key chocolate ingredient soar to unprecedented highs.

According to data from the Korea Agro-Fisheries & Food Trade Corporation (aT), the December delivery cocoa futures price on the New York market closed at $5,945 per ton on October 9, falling below the $6,000 mark. This figure represents a nearly 50% decrease from the all-time high of $12,931 per ton recorded in mid-December of the previous year and is the lowest since February of last year. For several years preceding the surge, cocoa had maintained a stable trading range around $2,500 per ton.

The Price Rollercoaster and Its Causes

The rapid escalation in cocoa prices was largely driven by severe supply shocks originating from West Africa, which accounts for approximately 60% of global cocoa production. El Niño-induced drought and widespread pest infestations ravaged crops in major producing nations, Ghana and Côte d'Ivoire, drastically reducing yields.

The ensuing price spike forced confectionery manufacturers worldwide to raise the cost of chocolate-containing products. In South Korea, major players like Lotte Wellfood and Orion implemented significant price increases for popular items such as Pepero, Choco Pie, and Crunch. Lotte Wellfood, for example, raised the price of 26 items, with the Chocolate Pepero retail price increasing by 300 won over an eight-month period. Orion, which increased prices on 13 products, also temporarily halted the supply of its To-U chocolate line.

Demand Destruction and Improved Outlook Drive Decline

The recent decline in cocoa futures is attributed to a combination of factors, chief among them the phenomenon of "demand destruction," where elevated chocolate prices led to a contraction in consumer demand. Concurrently, improving weather conditions have fueled optimism for a favorable harvest.

Industry reports suggest that improved rainfall in West Africa since mid-September has raised expectations for better crop yields during the ongoing harvest season. Furthermore, governments in Côte d'Ivoire and Ghana significantly increased the price paid to cocoa farmers, a measure intended to encourage accelerated harvesting and reduce cross-border smuggling, contributing to improved supply availability.

Financial analysts anticipate that the sustained price weakness could benefit South Korean confectionery companies like Lotte Wellfood and Orion.

Structural Challenges Persist

Despite the sharp retreat from record levels, the confectionery industry remains cautious about immediately reversing retail price increases. Representatives from the sector emphasize that current cocoa prices, while lower than their peak, remain approximately three times higher than the long-term stable level of a few years ago. Furthermore, the raw material currently being processed by manufacturers was often contracted at the previously high prices, maintaining a significant burden on production costs.

Long-term forecasts indicate that the price relief may be temporary, as the structural issues underpinning the market volatility have not been fully resolved. Concerns remain about the ongoing spread of crop diseases, the need to replace numerous aging cocoa trees, and the persistent threat of climate-related production risks. Industry experts suggest that the recent price drop, partially attributable to reduced chocolate demand, might be transient. Price increases are anticipated as demand typically surges during peak consumption periods, such as the upcoming Christmas and Valentine's Day holidays. The consensus among market observers suggests that a return to pre-2023 price levels is improbable.