THE world’s growing love of chocolate means more expensive treats for the Easter holiday. Demand is rising at the fastest pace in three years, according to Euromonitor International Ltd, and farmers in West Africa aren’t growing enough cocoa to keep up.
The cost of beans used to make chocolate reached a 30-month high in March, forcing confectioners to charge their customers more.
Lucy Armstrong, who sells sweets online from Chichester, England, said the cost of a 10-kilogramme (22-pound) pack of bulk chocolate she uses to make champagne truffles, pralines and salty caramels surged 18 per cent this year to 59 pounds (US$98).
She’s raised the price of chocolate Easter eggs by 50 per cent from last year, just before demand picks up for the holiday on April 20, and she plans another increase in the next six months.
“It’s definitely the first time where the chocolate has gone up quite noticeably,” said Armstrong, who started Lucy Armstrong Chocolates three years ago and now charges 7.5 pounds for a 170-gram Belgian milk-chocolate egg containing six hand-made chocolates, up from five pounds in 2013.
“It is hard to try and work out what you can sell and at what price. The problem is it’s only going to go up and up and up.”
Cocoa may rally to US$3,210 a metric ton on ICE Futures US in New York by the end of December, the highest since July 2011, according to the average estimate of 14 traders and analysts surveyed by Bloomberg News.
That would be up 6.3 per cent from yesterday’s closing price and top this year’s high of $3,039, reached on March 17.
Even with higher prices, global demand is growing, especially in developing markets including Asia. Seasonal sales of chocolate on holidays including Easter and Christmas will jump five per cent this year to $12.7 billion, Euromonitor said.
“The underlying concern is that there will not be enough cocoa available to satisfy the appetite of consumers,” said Andreas Christiansen, managing director of Hamburg Cocoa & Commodity Office GmbH, a consultant to the confection industry.
“The growing appetite for cocoa or cocoa-based products in emerging markets is what is driving expectations that consumption will outpace production.”
While farmers are harvesting larger crops now, production in the season that starts in October may be threatened if El Nino develops, Ecobank’s George said.
The meteorological phenomenon characterized by warming equatorial waters in the Pacific Ocean can bring drying so-called Harmattan winds to West Africa, parching cocoa crops. The US Climate Prediction Center says the odds are now 65 percent that El Nino will develop.
Increasing chances of an El Nino raises the risk of higher prices for commodities, including cocoa, Goldman Sachs Group Inc. said in a report dated April 13.
Demand continues to grow in Asia, spurring expanded grinding capacity in Indonesia. Cocoa processing in the region rose 3.7 percent during the first quarter from a year earlier to 159,617 tons, the Singapore-based Cocoa Association of Asia said yesterday. The figures are for Malaysia and members in Singapore and Indonesia, according to its website.
In North America, processing rose 1 percent in the quarter to 129,007 tons, the National Confectioners Association said yesterday. Analysts surveyed by Bloomberg expected 128,138, on average. The industry surveyed processors including Hershey Co., Mars Inc. and Nestle SA.
Money managers are betting the cocoa rally isn’t over. With prices already up 30 percent from a year ago, hedge funds and other large speculators held a net-long position of 67,994 futures and options contracts as of April 8, up from 11,061 a year earlier, US Commodity Futures Trading Commission data show. Holdings have been bullish since July 2012.
“In the long term, if we do see more and more cocoa beans sucked into the Asian market, and they become scarcer, then inevitably prices will go up,” Ecobank’s George said. “It could be that cocoa becomes again a real luxury product, like champagne.” — Bloomberg