Cocoa futures drifted lower at midweek trading as buyers took some profits off the table amid the strong dollar breaking past its one-year high. ICE cocoa lost nearly a percent to trade at $2,568 a ton in New York.

Producers such as Nigeria, Cameroon, and Ecuador are in the middle of their harvest season and have been hedging cocoa into the market. Prices have fallen to a point where the industry is willing to extend cover for cocoa.

Market pundits still expect global output in 2021/22 to be high, even though it is expected to fall from the record levels seen last season. Inventories and 2021/22 production should ensure that demand this season will be easily met, without putting significant upward pressure on prices.

Boosted by inflation concerns and hopes that the Federal Reserve will raise interest rates, the dollar index for yesterday hit its highest level in a year. The stronger dollar could cap the price of dollar-denominated commodities like cocoa.

On the back of a slowly recovering global economy, cocoa yields in Nigeria are lower than those in other pod-producing countries, which is a far cry from the days when Nigeria’s cocoa industry soared in the 1960s. Statista reports that Nigeria produces between 250,000 metric tons and 300,000 metric tons of cocoa per year, in contrast to Ivory Coast, which produces above 2 million metric tons of cocoa annually.

In addition to Ivory Coast and Ghana, Indonesia and Nigeria are also major producers of cocoa. Despite ageing farms and poor replanting programmes, yields remained low in these countries. The total harvested area in Nigeria is 640,000 hectares, with an average yield of 400 kilograms per hectare. Nigeria has worsened its low yield problems due to ageing farmers, improper farm management, low inputs, poor infrastructure, and weak extension services.

Meanwhile, global chocolate makers are being accused of turning a blind eye to serious problems in the cocoa sector due to market volatility, causing farmers in Africa to lose a substantial amount of income.

Farmers will be driven into poverty by lower prices, which will increase the prevalence of modern slavery and increase the rates of illegal child labour. Deforestation is also linked to higher poverty rates among cocoa farmers, who increase their land in an effort to increase incomes.