Why Asia's top grinder is struggling to source cocoa beans
The world is facing a third straight year of cocoa supply shortage, brought about by subpar harvests in key growing regions. Guan Chong, a leading cocoa processor, is now sourcing beans worldwide due to crop damage from unfavorable weather and disease in top West African producers. This predicament has driven cocoa prices to an all-time high.
Guan Chong seeks assistance from smaller growers amid crisis
Guan Chong, listed in Kuala Lumpur, is currently acquiring cocoa from smaller growers in Ecuador, Peru, and Indonesia. This strategy is a response to fears that suppliers in major producing nations like Ivory Coast and Ghana may fail to fulfill supply contracts. Consequently, the company is paying extra to secure these beans during the ongoing crisis.
Escalating prices and premiums amid cocoa shortage
"Everybody is panicking," said Brandon Tay Hoe Lian, CEO of Guan Chong. "Prices are escalating daily, but the beans are not arriving." The company is not only vying for beans but also paying extra due to the shortages. This situation aligns with an increasing seasonal demand for chocolate, resulting in erratic price fluctuations and substantial premiums for near-term supplies.
Guan Chong maintains operations despite challenges
Despite the cocoa shortage, Guan Chong's factories continue to function and are "comfortably" and "sufficiently" stocked for the remainder of the year. However, to prevent contract breaches, the company is persistently liaising with suppliers to ensure deliveries and seeking additional beans. To avoid shutting down plants, grinders are paying substantial premiums for beans. These markups are now reaching approximately $400 (around Rs. 33,250) a ton in Ecuador and Peru, and at least $500 (about Rs. 41,600) in Indonesia.
Cocoa prices could hit record highs by 2025
The most active cocoa contract in New York has doubled this year and reached $8,493 (around Rs. 7 lakh) a ton this week, the highest on record. According to Citi Research analysts, prices could soar as high as $10,000 (approximately Rs. 8.3 lakh) a ton and remain high until the second half of 2025. Guan Chong's CEO noted that he had not witnessed such frenzied trading and supply issues in his three-decade-long career in the cocoa industry.
