Here’s why cocoa, and, olive oil, orange juice prices surged in 2023

The prices of key soft commodities surged in 2023, helping to drive food inflation higher in key countries. A closer look shows that some cocoa price jumped to a high of $4,300 in 2023, which was over 71% higher than its January lows.

Orange juice prices also spiked to a record high in November. It has pulled back a bit to $3.54, a few points below the year-to-date high of $4.26. Olive oil prices also continued rising in 2023. After hitting a record high in November, sugar prices crashed hard, as I wrote here.

The performance of these soft commodities like cocoa, olive oil, coffee, and orange juice diverged from others like corn, wheat, and soybeans that dropped by double-digits. Other commodities like oil and natural gas also plunged during the year.

Cocoa prices jumped sharply because of weather conditions in West African countries like Ghana and Ivory Coast, which account for over 70% of global production. The two countries saw reduced output in 2023 because of weather events and disease.

Unlike other crops that struggled because of dry conditions, cocoa production was affected by higher-than-usual rain in the two countries. High rainfall reduce yield and delays harvesting. Ghana’s cocoa production tumbled to the lowest point in over 13 years while Ivory Coast’s dropped to a seven-year low.

It also led to black pod, a condition that has reduced the quality of cocoa beans produced in the countries. The challenge for cocoa is that there are no other large producers to substitute West Africa’s crops. Also, unlike coen and soybeans, it takes years for a cocoa plant to start producing.

Meanwhile, olive oil and orange juice prices crashed because of weather factors. Orange juice’s key issue was the recent hurricanes in Florida that have affected the biggest farmlands. 

Florida has never recovered from Hurricane Irma, which happened in 2017, destroying vast farmlands. To make things worse, the state witnessed a disease known as citrus greening that has impacted yields. 

Therefore, companies have rushed to replace Florida’s orange juice with one from Brazil. Like cocoa, it takes a few years for a citrus tree to start producing fruits. As a result, the demand and supply dynamics have pushed orange juice prices to a record high.

Weather conditions also explain why olive oil prices surged in 2023. Most olive oil is grown in Mediterranean countries like Spain, Italy, Greece, and Tunisia. These countries went through an extremely hot spring. In a statement, the Spanish meteorological department noted that three of the past four seasons were the hottest on record.

It is unclear whether these soft commodities will continue soaring in 2024. Technically, there are signs that they have gotten overbought and that they are ripe for a pullback.