ZURICH — Barry Callebaut is working with the governments of the Ivory Coast and Ghana, the world’s two largest cocoa producers, to increase cocoa supply. Legislation put into place in 2018 in the West African countries prohibits farmers from replanting trees, said Peter Feld, chief executive officer of Zurich-based Barry Callebaut.

“At that point in time, the government was concerned about expansion and erosion of prices,” he said in a Nov. 6 earning call to discuss fiscal-year results. “We now, obviously, have an opposite situation.”

Barry Callebaut is talking to the governments about changing the law on replanting.

“I do think the message has landed with the governments both in Ghana, as well as in Cote d'Ivoire (Ivory Coast), but we need to put it in legislation,” Feld said. “We need to continue to get allowance to actually go for seedling planting again.”

The weather conditions in West Africa are better than a year ago, which should lead to a better harvest next year, Feld said.

“We see a significant improvement versus last year.” he said. “However, still not at the '22-'23 levels.”

The state dictating the price paid to cocoa farmers in the Ivory Coast may curtail the incentive for cocoa farmers to increase planting, Feld said, adding no productivity improvement has yet to happen in Ghana, where the fixed farmgate price rose to $3,000 per tonne several weeks ago.

“We can't assume that for this harvest, we would have an improvement in productivity based on more money with the farmers and investment into fertilizers, into replanting and other activities,” he said. “That's different outside of Cote d'Ivoire and Ghana. For example, in Ecuador, where the farmer has actually benefited from the high cocoa prices and where you can clearly see an investment going forward into productivity in the farms.”

In South America, high-technology cocoa farms may increase supply. Barry Callebaut is partnering with such a farm in Brazil.

“The scaling of high-tech farming has not happened in this industry yet,” Feld said. “We do think we know it because we have spent the past eight years to actually define all the details of how to do that in Ecuador, in our own farm.”

During the 2023-24 fiscal year, terminal market prices for cocoa beans fluctuated between £2,869 ($3,696) per tonne and £9,835 per tonne, closing at £5,322 per tonne on Aug. 31, according to Barry Callebaut. On average, prices increased by 131% versus the prior year.

Sales volume for Barry Callebaut slipped to 2,279,811 tonnes from 2,280,925 tonnes in the previous fiscal year. Sales revenue increased 23% to 10.39 billion Swiss francs ($11.86 billion) from 8.47 million Swiss francs, driven by the acceleration in cocoa bean prices. Operating profit was 446 million Swiss francs ($509 million), down 32% from 659 million Swiss francs. Operating profit recurring was 704 million Swiss francs, up 13% from 659 million Swiss francs. Non-recurring items were Brazilian indirect tax credits and the costs of Barry Callebaut’s Next Level investment program.

In the company’s global chocolate business, volume rose 0.3% to 1,818,294 tonnes. Volume for food manufacturers decreased 1.5% as soft demand from large global customers was offset partly by a strong performance for private label customers. Gourmet delivered volume growth of nearly 10%. Strong performances came across geographies and market segments. Within global chocolate in North America, volume decreased 1.8%, driven by slower demand for large food manufacturers.

In the global cocoa business, sales volume decreased 1.4% to 461,517 tonnes. Supply constraints negatively impacted cocoa butter and cocoa liquor sales.

In the 2024-25 fiscal year, Barry Callebaut expects flat volume with slightly positive growth for global chocolate.