Cocoa and coffee prices have risen dramatically, with cocoa prices climbing by nearly 500% and coffee prices by nearly 200% in 2024, following a more stable price pattern between 2012 and 2022.
These tropical crops need stable warm temperatures and abundant water, conditions found in the equatorial "Bean Belt". Extreme weather variations caused by climate change have led to a sharp rise in prices.
The extreme weather patterns of El Niño
The El Niño-Southern Oscillation (ENSO) is a cyclical weather pattern with three phases:
- The El Niño phase, characterised by abnormal warming of Pacific waters and often causes droughts in the Bean Belt.
- The La Niña phase, characterised by a cooling of Pacific waters that causes wetter and colder conditions.
- The neutral phase, where no anomalous changes occur and the weather patterns are more stable.
The ENSO cycle is irregular, occurring every two to seven years. The El Niño phase usually lasts nine to 12 months.
Prices stabilising after recent rainfall
The recent arrival of rains in East Africa and Brazil has brought relief, stabilising the uptrend in cocoa prices, causing them to decline in recent months. Bulk cocoa beans are now trading over 30% below their annual highs and near three-month lows.
Changing climates
Climate change could intensify extreme phenomena such as El Niño and La Niña, potentially endangering crops that require more stable weather conditions, and driving up prices and volatilities. However, within these major long-term changes normal weather patterns could set the pace for prices across shorter timeframes.
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