By Asia Society Policy Institute Research Associate, Genevieve Donnellon-May

Skyrocketing cocoa prices in recent months along with the world’s biggest cocoa supply deficit – 374,000 tonnes – in more than sixty years have raised fears of a looming chocolate shortage amid ongoing global food insecurity concerns.

While global cocoa supplies are expected to fall by nearly 11 percent to 4.449 million tonnes in 2024, demand remains high and is projected to continue rising in the coming years.

Cocoa beans contribute to food security in various ways, primarily through their economic impact on the livelihoods of smallholder farmers and the support of local economies. Their shells can also be used in fertilizers.

Aside from culinary, cultural, health and wellness (such as skincare), cocoa beans and their by-products can also be used for other purposes like pharmaceutical products and industrial uses. 

The price of cocoa is soaring amid adverse weather conditions devastating harvests in West Africa, home to the world’s four biggest cocoa producers – Ivory Coast, Ghana, Nigeria, and Cameroon. These four countries provide nearly 75 percent of global cocoa supplies and for whom cocoa beans and cocoa products are major agricultural exports. In Ghana, for instance, the cocoa sector generates around 30 percent of the country’s export earnings and between 2 to 3.5 percent of the country’s gross domestic product (GDP).

Further adding to concerns are ageing cocoa trees producing lower yields and deforestation, thereby putting even more strain on the global cocoa supplies amid fears of chocolate shortages. Chocolate manufacturers are passing on surging costs for cocoa on to consumers by increasing prices, shrinking bar sizes (“shrinkflation”) or adjusting products to reduce the amount of cocoa necessary. In the case of the latter, this could take the form of adding, for instance, almonds or other nuts to the product to bulk it up. 

While these shortages might sway consumption patterns particularly in industrialised countries, maintaining levels of production of one of the world’s more sought-after commodities foods is beneficial for cocoa producers which are invariably developing states, and which can seek to capitalise on high global demand for cocoa for their own profit.

As the cocoa crisis continues on for manufacturers and consumers alike, it is a boon for alternative suppliers, particularly those in the Indo-Pacific. Notably, Indonesia, the world’s third-biggest cocoa producer, currently contributes 15 percent to global cocoa supplies. With a population of 278 million of which 43.9 percent is under the age of 29, the country could seek to increase production and exports through harnessing its young workforce.

Political leaders in the region appear interested in doing so. In particular, the Indonesian president-elect has emphasised the importance of improving national food security through greater agricultural production self-sufficiency while the Ministry of Industry recently floated the idea of establishing in-country lobal cocoa processing hubs. However, concerns such as low yields limited access to finance to replace ageing trees will need to be addressed. 

There are opportunities too for smaller cocoa countries in Southeast Asia and the Pacific to benefit by increasing production and exports, albeit more modestly. Malaysia, for instance, which seeks to reduce reliance on cocoa bean imports, aims to boost domestic cocoa production and develop made-in-Malaysia chocolate brands.

Similarly, the Philippines, which produces under 1 percent of the world’s cocoa supplies, has global ambitions for domestically-produced chocolate. Following the current Marcos administration’s recently published Philippine Development Plan (2023–2028) which calls for safeguarding domestic food security, greater attention may go to farmers and producers to help increase domestic agricultural production, including for cocoa.

Likewise, Papua New Guinea, which produces less than 1 percent of global cocoa supplies, also remains interested in boosting its agricultural output. As agriculture is considered the country’s backbone, there is already talk that supporting cocoa production could encourage further socioeconomic development. The government’s interest in generating foreign direct investment, including for agriculture, demonstrates that this could extend into cocoa production.

However, challenges lie ahead. And climate change, which causes increased air temperature, erratic rainfall patterns, and extreme weather events is one of the biggest concerns. 

Notably, climate change impacts can result in the significant destruction of agricultural production (such as crop destruction) and are also linked to lower agricultural yields and soil quality degradation, thereby further adding to agricultural production woes.

In the case of cocoa beans, both too much and too little rain can cause headaches for farmers with the crop requiring an ideal annual rainfall of 1500 to 2500 millimetres. 

The impact of too much precipitation was notably seen in the Ivory Coast in 2023 when some agricultural areas in some parts of the country received significantly higher than average rainfall – as much as 20 to 40 percent in some areas than previous decades. Devasting much of the country’s cocoa harvests, this resulted in expectations of a harvest three-to-fourfold smaller than in the previous year, despite a national target to boost cocoa production in the country to 2 million tons by 2025.

In this light, concerns around the link between climate change impacts and destruction of agricultural production are further exacerbated by the prospect of greater, more frequent, and stronger extreme climatic events which will have a devastating domino effect on local economies and employment.

To address this issue, governments and the private sector could allocate funding for research institutions to providing farmers with access to knowledge, resources, and technologies (climate-smart agricultural practices) designed to local contexts in cocoa-producing regions.

The implementation of integrated pest and disease management (should also be considered. As approximately 30 percent of world cacao production is lost due to pest and diseases annually, reducing the potential for these threats can thereby improving cocoa yields. Countries could look to Indonesia where a United States Department of Agriculture-funded programme, which included IPDM practices, led to a significant cocoa yield increase from 600 kilogram/hectare to 995 kilogram/hectare.

The global cocoa shortage presents a multifaceted challenge but also opportunities that demands immediate action and long-term strategic planning, particularly in the Indo-Pacific. Governments, industry stakeholders, and international organisations must collaborate to address the root causes of the shortage in the long-term. To achieve this, key investments in research, technology, and sustainable farming practices offer the promise of a more resilient cocoa industry.

By honing in on impactful policy measures, major and smaller, alternative cocoa-producing countries have a stronger change of address challenges and meeting future global cocoa demands while also supporting local economies.

This article originally appeared in Asia Sentinel.