Cocoa cultivation affected by climate change (Shutterstock)

The cocoa, coffee and tea industries face many challenges that threaten their sustainability and continuity in light of market, social and environmental changes, according to a report published by the British newspaper “Financial Times”.

Red Sea attacks

According to the newspaper, some markets are suffering from a shortage of tea stocks due to supply disruptions as a result of Houthi attacks on ships in the Red Sea, which are considered an expansion of Israel’s war on the Gaza Strip.

The report noted that there is no major problem with production in India or Kenya, but tea takes longer to arrive as a result of shipping routes shifting to the Cape of Good Hope around Africa.

In its report, the newspaper expected that cocoa would be next, as the price of its powder and hot chocolate in British stores increased by 25% during the year ending last January.

Coffee cultivation has become plagued by difficulties in cultivation and transportation (Shutterstock)

Cocoa futures hit record highs, driven by extreme weather and crop damage in West Africa - where most cocoa comes from - while many of the world's 6 million small-scale cocoa farmers face difficulties.

The report considered the current tensions an indication of the fragility of globalization and the smooth production and transfer of products from the south to Europe and the United States. Arabica coffee has returned to surplus after rising prices in 2021, due to drought and frost in Brazil, but low-quality Robusta beans from Vietnam are suffering from a shortage. Supply damaged by disturbances in the Red Sea.

Tea races

Ironically, according to the report, tea is transported over long distances around Africa away from the Suez Canal, the opening of which in 1869 put an end to the “tea races” carried out by sailing ships to bring supplies from China to the West as quickly as possible.

Once steamships were able to shave thousands of miles off the journey across the canal, ships became redundant.

The report pointed out that the Suez Canal may be able to resume its normal operations in due course, but the vital trade route will remain a tempting target for attackers, and the Panama Canal has also been forced to limit the passages.

The newspaper pointed out that the production of agricultural commodities has always been characterized by volatility, with production rising one year and declining the next, but climate change increases risks and makes it difficult for farmers to earn a stable living, as they have less capital to invest in agriculture, and less reason to persevere.

Cocoa was not an exception to the negative effects, as its high prices portend a negative impact on the candy industry this year, and growing conditions have been difficult in countries such as Ghana and Nigeria, to the point that farmers cannot harvest enough to process it into butter for making chocolate.

Speculations

Speculative hedge funds have created a crisis, and even well-intentioned measures may have unintended effects. A new EU law aimed at combating deforestation could decimate coffee and cocoa stocks in European warehouses (farmers of both crops clear forests to expand their acreage to increase production).

The report indicated that the “ancient empires” of coffee, cocoa and tea have become fragile amid climate change and the disruption of global trade routes, and the result is visible on the shelves of grocery stores, which are in short supply of products.

Earlier, a Reuters report expected that cocoa markets would witness a global deficit of 375,000 tons in the 2023-2024 season.

As cocoa prices continue to rise unprecedentedly - the Reuters report says - the industry is preparing for possible long-term consequences, at a time when analysts are closely monitoring the upcoming crop rounds in the second quarter to assess the severity of the situation and its effects on future seasons.

Source: Reuters + Financial Times