Economics for Business: Analysis of Cocoa Market and Price Change in European Market

Running head: ECONOMICS FOR BUSINESS
Economics for business
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1ECONOMICS FOR BUSINESS
Executive Summary:
The report focuses on cocoa market and its price change. Due to increasing demand for
chocolates, the demand for this cash crop has increased significantly in European market. For
making this food item, cocoa is used as one of the chief ingredient. Africa has remained one
of the main suppliers of this bean due to its favourable weather. However, Latin America is
increasing its supply of cocoa in world market. The cocoa price has fluctuated in European
market over the past few years due to changing demand for and supply of this ingredient.
Thus, this report is going to analyse this implication with the help of microeconomic concept.

2ECONOMICS FOR BUSINESS
Table of Contents
Introduction:...............................................................................................................................2
Main findings:............................................................................................................................3
Demand factors:.........................................................................................................................3
Supply factors:...........................................................................................................................7
Recommendations:...................................................................................................................11
Conclusion:..............................................................................................................................12
References:...............................................................................................................................13
Appendices:..............................................................................................................................16

3ECONOMICS FOR BUSINESS
Introduction:
Since 16th century, the chocolate industry of Europe is earning significant importance,
as it produces largest amount of chocolate all over the world. As a result, demand for
flavoured cocoa with higher quality has increased rapidly in the European market. Cocoa is
considered as an important crop, which helps producing countries across the world to
improve their economic conditions. Moreover, importing countries imports this cash crop by
large extend to process and consume. Ghana and Ivory Coast supply huge amount of cocoa to
Europe for meeting excessive demand (Amankwah-Amoah, Debrah and Nuertey 2018).
However, their marketing share is decreasing continuously due to increasing share of Latin
Americana suppliers (Sepúlveda, Ureta, Mendoza and Chekmam 2018). The entire process of
cocoa production considers various economic factors like farmers, shipping organisations,
processors, buyers along with chocolatiers and distributors. Sustainability has become an
important issue, as European consumers want to know details about the cocoa production and
the effect of their purchases. This increasing demand for cocoa along with its increasing
supply determines the market price of this product in Europe (Fowler and Coutel 2017).
Cultivation of cocoa depends on various conditions like pattern of weather, insects and
diseases. The chief difference of cocoa with other cash crops is that maximum share of cocoa
comes from small size farmers, who follow traditional process of cultivation with their
limited organisational advantage. However, a steady demand for this crop in international
market provides global efforts and funds to aid and develop the sustainability of cocoa farm.
Cocoa is traded on two-world exchange, which are, London (LIFFE-Pound) and New York
(ICE- USD). Basic microeconomic theory of demand and supply along with their factors can
be described. This is also true for cocoa, as its price is determined with the help of market
demand and market supply (Odijie 2018). This report considers statistical data for analysing