Sweet Shock: Chocolate Prices May Skyrocket

The world’s sweet tooth may soon face a bitter reality as chocolate prices threaten to soar. Following last year’s price shock with orange concentrate, which drove up the costs of orange juice in stores, another commodity – cocoa – has been hitting record highs. Since the beginning of the year, cocoa prices have doubled, continuing an unprecedented rise that began last year. It’s only a matter of time before this substantial increase reflects in-store prices, potentially causing the cost of chocolate and other confections to rise by tens of percent.

In early last year, cocoa on the New York Stock Exchange hovered around $2500 per ton. By January this year, it was significantly higher, around $4200. However, the past three months have seen the price surge above $8000. In fact, on Monday, the price temporarily hit a value of $8493 per ton, a worrying development for consumers, particularly with Easter approaching, a time when nearly 90% of people in the U.S. purchase confectionery.

Chocolate manufacturers typically buy cocoa beans well in advance, so they still have some stockpile left. Yet, it remains a question of time before the increased costs are reflected in the final prices of their products. A rise in cocoa prices is unprecedented, and there’s likely no chocolate manufacturer out there who hasn’t felt its impact. Cocoa is the primary ingredient in all chocolate confections.

The dramatic rise in cocoa prices is due to a poor harvest in West Africa, where up to three-quarters of global production originates. Bad weather and the El Niño climatic phenomenon have negatively affected the harvest there in the past two years. The situation was first hit by drought during the ripening of cocoa pods, followed by a wave of rain that brought diseases to cocoa trees and devalued the produce. Deliveries of cocoa from Ivory Coast, the world’s largest producer, have fallen 30% year-on-year.

Manufacturers may react in several ways. Besides raising prices, they might employ tactics such as reducing the weight of a product while keeping the same selling price or altering the recipe to decrease the volume of the cocoa component. This situation might force consumers to choose substitutes or other products, similar to the recent price increases of olive oil and orange juice.