About 50% of the world’s chocolate originates from cacao trees in the West Africa countries of Ivory Coast and Ghana. The damaging virus is attacking cacao trees in Ghana, resulting in harvest losses of between 15 and 50%. Spread by small insects called mealybugs that eat the leaves, buds and flowers of trees, the cacao swollen shoot virus disease (CSSVD) is among the most damaging threats to the root ingredient of chocolate.
“This virus is a real threat to the global supply of chocolate,” said Benito Chen-Charpentier, professor of mathematics at The University of Texas at Arlington and an author of “Cacao sustainability: The case of cacao swollen-shoot virus co-infection” in the journal PLoS One. “Pesticides don’t work well against mealybugs, leaving farmers to try to prevent the spread of the disease by cutting out infected trees and breeding resistant trees. But despite these efforts, Ghana has lost more than 254 million cacao trees in recent years.”
Farmers can combat the mealybugs by giving vaccines to the trees to inoculate them from the virus. But the vaccines are expensive, especially for low-wage farmers, and vaccinated trees produce a smaller harvest of cacao, compounding the devastation of the virus.
Futures have soared about 160% already this year as poor West African harvests leave the world desperately short of beans. But the rally has made it more expensive to maintain positions, prompting investors to close out trades, draining liquidity and making the market more vulnerable to large price swings.
Cocoa jumped as much as 5.2% to $10,985 a ton on Wednesday, snapping a 9% two-day slide. That helped push a 60-day measure of volatility to the highest since 1977.
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There’s still much uncertainty over global supplies. Still, a shift from the El Nino weather phenomenon to La Nina will likely help global production recover next season. That weighed on prices early this week, the Hightower Report said in a note.
Traders will also keep a close eye on short-term weather and crop conditions in the crucial West Africa region. Rainfall in West Africa this week is expected to aid production, ADM Investor Services wrote in a note, adding that the “cocoa market is looking toppy for the first time in a long while.”
While there is room for some easing of prices if West African weather improves during the second half of the year, recent market moves have been mostly technical as futures met resistance when nearing the $12,000 a ton level, said Leonardo Rossetti, senior market intelligence analyst at StoneX.
Meanwhile:
World's Chocolate Supply Threatened by Devestating Virus
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