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, 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 bulk chocolate she uses to make champagne truffles, pralines and salty caramels surged 18 percent this year. She’s raised the price of chocolate Easter eggs by 50 percent from last year, just before demand picks up for the holiday 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. “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.”
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Cocoa may rally to $3,210 a metric ton on ICE Futures U.S. 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 percent from Thursday’s closing price and top this year’s high of $3,039, reached on March 17.
The U.S. price of cocoa butter, the byproduct of crushed beans that accounts for 20 percent of the weight of a chocolate bar, rose 86 percent in the 12 months through April 11 and is the highest on average for any year since at least 1997, data from the Cocoa Merchants Association of America show.
The cost of other ingredients also are rising, after milk reached records this year in the U.S. and Europe and sugar futures rallied 20 percent from a 43-month low in January.
While global bean production will rise for the first time in three years, reaching 4.104 million tons in the 12 months that end Sept. 31, that will be less than demand for a second straight year, with processors set to use 4.178 million tons, the International Cocoa Organization in London said. Supply concerns are being compounded by increasing prospects of an El Niño weather pattern, which can bring dry winds to West Africa, including top growers Ivory Coast and Ghana.
Long-term output deficits are fueling “bullish momentum” for prices, according to an April 3 earnings statement from Zurich-based Barry Callebaut, the world’s top processor and biggest maker of bulk chocolate.
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 5 percent 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, a consultant to the confection industry.
In Germany, where per-capita chocolate consumption is the highest in the world, confectioners will produce 206 million bunnies for Easter this year, 8.4 percent more than a year earlier, according to the Association of the German Confectionery Industry.
Cocoa’s gains may be limited as supply prospects improve in West Africa.
“We’re looking at a strong mid-crop in West Africa, after a good main harvest,” said Sterling Smith, a futures specialist at Citigroup in Chicago. “Assuming we have no weather problems, prices could ease amid increased supplies.”
Demand continues to grow in Asia, spurring expanded grinding capacity in Indonesia.
Money managers are betting the cocoa rally isn’t over.
“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,” said Edward George, the head of soft commodities research at Ecobank Group in London.
“It could be that cocoa becomes again a real luxury product, like champagne.”
With assistance from
Marvin G. Perez in New York