Will cocoa prices keep going up?

One of the points often ignored in the whole debate about child labor in West Africa is the fact that cocoa prices were at an all time low just when the first reports of child slavery emerged in the Western press. According to IMF price data, the average price in 2000 was $903/metric ton, a bare shadow of the $3,791 cocoa commanded in 1977. And these aren’t just a few market swings. There’s been a long term decline in cocoa prices.

Over the past months and years, however, the prices have increased somewhat. There’re still nowhere near the high points of the late 1970s, but they have been consistently above  $2,000/metric ton for December 2007, reaching as high as $2,210 before falling off again. In a report, the ICCO indicated that for 2007, cocoa prices increased by 23% in New York. While there are some indications that investment funds, reeling from the subprime mortgage crisis, are looking for another speculative vehicle, there are also indications that the world supply of cocoa is not keeping up with demand. For the cocoa year 2006/07, the ICCO’s revised estimate shows a growing gap between total production and total cocoa grindings. If this represents a new trend then there may be some hope that the increase in prices will allow farmers to higher adults rather than children on their farms.

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