YIJC 2026 JC2 H2 Prelim P1 SUGGESTED ANSWER

Answer all questions. Question 1: The Global Cocoa Crisis and the Chocolate Industry Table 1: Global cocoa bean production and average prices (2020-2024) Year Production (million tonnes) Average cocoa price (US$/kg) 2020 5.68 2.37 2021 5.77 2.43 2022 5.62 2.39 2023 5.12 3.28 2024 5.22 7.33 2025e 4.72* 6.61* e = estimate Sources: Food and Agriculture Organization (FAOSTAT), World Bank Commodity Price Data (The Pink Sheet); International Cocoa Organization (ICCO) Table 2: Global cocoa bean production by region (2024) Region Production (tonnes) Share of world production (%) Africa 3,424,758 65.6 Asia 677,328 13.0 South America 961,840 18.4 North America 107,841 2.1 Oceania 51,430 1.0 World total 5,223,196 100.0 Source: Food and Agriculture Organization (FAOSTAT) Extract 1: Why are cocoa prices rising? Global cocoa prices reached record highs in late 2024 and remained above US$10 per kilogram in early 2025. The sharp increase in cocoa prices has been driven by concerns over poor weather conditions in West Africa, a major cocoa -producing region and the primary supplier of cocoa beans to the European Union (EU). According to the World Bank, global cocoa production is estimated to have declined by 14 percent in the 2023 –24 season. This decline is largely due to lower cocoa output in Côte d'Ivoire and Ghana, which together account for nearly 60% of global cocoa production. Cocoa beans is the key ingredient used in the production of chocolate and confectionery products, and manufacturers have limited scope to reduce their use of cocoa in the short run despite the sharp increase in prices. The rise in cocoa prices has also been exacerbated by strong seasonal demand, as consumers stocked up on cakes and chocolates during the festive season, resulting in a global cocoa deficit. The International Cocoa Organization (ICCO) reported a production deficit of 478 000 tonnes for the 2023–24 season. End-of-season cocoa stocks are projected to fall to 1.3 million tonnes, the lowest level in 46 years. Source: Adapted from FoodNavigator, 6 February 2025.

Extract 2: European chocolate manufacturers respond to rising cocoa prices The European Union (EU) is the world's largest importer and processor of cocoa beans. Consequently, the sharp increase in global cocoa prices has significantly increased production costs for chocolate manufacturers across Europe. Retail chocolate prices in the EU increased by an average of 17.9% in 2025, although the increase varied considerably across member states. The European chocolate manufacturing industry is dominated by a small number of large multinational companies, including Mondelēz International, Mars, Nestlé, Ferrero and Lindt & Sprüngli, which together account for a substantial share of the European chocolate market. These firms compete intensely through product innovation, advertising and brand development while closely monitoring competitors' pricing and product strategies. Chocolate manufacturers have adopted different strategies to reduce the impact of higher cocoa prices. While many firms increased the retail prices of their chocolate products, others reduced the size of chocolate bars while maintaining the same selling pr ice, a strategy commonly known as "shrinkflation". Some manufacturers also reformulated recipes by reducing the cocoa content or using alternative ingredients to limit further increases in production costs. At the same time, some manufacturers have responded by strengthening their premium chocolate brands. Mondelēz International, one of the world's largest confectionery companies, has invested 65 million Swiss francs in expanding production at its Toblerone factory in Bern, Switzerland. The investment forms part of the company's strategy of developing higher-value chocolate products that are expected to maintain consumer demand even as prices rise. According to industry analysts, premium chocolate brands are better able to protect profit margins while differentiating their products in an increasingly competitive market. Besides adjusting product offerings, manufacturers have also increased investment in automation, product innovation and sustainable cocoa sourcing. These measures aim to improve production efficiency and reduce dependence on volatile cocoa supplies over th e longer term. However, these investments require substantial financial resources and are unlikely to reduce production costs immediately. Industry analysts therefore expect chocolate prices to remain relatively high in the near future. Sources: Adapted from FoodNavigator, 6 February 2025; CocoaRadar, March 2026. Extract 3: Can cocoa production become more sustainable? Cocoa production is one of the leading drivers of deforestation in West Africa. Forests are often cleared to establish new cocoa plantations, threatening biodiversity and wildlife habitats. Unsustainable cocoa production can also contribute to soil degrada tion and greenhouse gas emissions, threatening the long-term sustainability of cocoa farming. Governments, chocolate manufacturers and international organisations are encouraging farmers to adopt more sustainable farming practices through training, sustainability certification schemes and investments to improve productivity on existing farmland rat her than expanding into forest areas. The European Union has also introduced regulations requiring cocoa imported into the EU to be sourced from land that has not been recently deforested.

While these measures may increase production costs and limit cocoa expansion in the short run, supporters argue that they will protect forests and improve the long -term sustainability of the cocoa industry. Others argue that cocoa remains a major source of employment and export revenue in many producing countries, and stricter environmental requirements may slow economic growth and reduce farmers' incomes. Sources: Adapted from National Wildlife Federation, Cocoa and Deforestation; United Nations Environment Programme, Can Cacao Farming, Long a Driver of Deforestation, Really Become Sustainable?; CBI, Tips to Go Green for Cocoa Exporters. Questions (ai) Using Table 1, describe the relationship between global cocoa production and average cocoa prices between 2020 and 2025. Inverse/ Negative. [1] As global cocoa bean production decreased, average cocoa prices increased. [1] Marker’s Comments Most students were able to identify that global cocoa production and average cocoa prices moved in opposite directions. However, only some students were able to accurately describe this as an inverse/negative relationship . The weakest responses merely traced the data , describing how production and prices changed from year to year, without identifying the overall relationship between the two variables. [2] (bi) With reference to Table 2, explain why cocoa producers in Africa may have significant influence over the world cocoa market price. • Africa accounts for 65.6% of global production. World supply is therefore highly concentrated. [1] • A fall in African output causes a significant leftward shift of global supply [1] • Marker’s Comments Most students were able to identify Africa as the largest cocoa-producing region, accounting for 65.6% of global cocoa production . However, few were able to explain why this gives African cocoa producers significant influence over the world cocoa market price. i.e high concentration of global cocoa production in Africa means that a change in African output will cause a significant change in world supply. [2] (bii) Using a diagram and the concept of price elasticity of demand, explain how poor weather conditions in West Africa will affect the total revenue of cocoa producers in 2024. [4] Price

[1] Diagram: The diagram should show a correctly labelled demand and supply