Every day brings new crises in the financial world. Scandals, government intervention, recessions, price manipulations. Journalists have their hands full reporting about currency collapses, oil embargos and stock IPOs.
A sudden scarcity in gold or other metals makes immediate headlines but a shortage of one of life’s most prized commodities rarely hits the papers. I’m talking about chocolate! That’s right. Chocolate, the dainty of choice for chocolate aficionados, children and depressives everywhere, has become increasingly expensive and predictions for the future are not very promising.
Cocoa=Chocolate
All chocolate lovers know that their favorite snack is made primarily of cocoa. Cocoa has surged this year by at least 10 percent, hitting almost $3,195 a ton in March, this following a 20 percent increase last year. The commodity's escalating price has been led mostly by heightened emerging market demand, with consumption of the sweet treat in China alone tripling over the last 4 years. This has led some analysts to believe chocolate may eventually become a luxury item like Champaign. Oh no!
According to Edward George, head of soft commodities at Ecobank, consumption in China is relatively small compared to Europe despite the surge in demand. The Chinese only consume per capita about 5 percent of what the average Western European eats. Dark chocolate, which contains a good deal more cocoa by volume than traditional chocolate bars -the average chocolate bar contains about 10 percent, while dark chocolate often contains upwards of 70 percent- is rising in popularity, increasing even more the need for cocoa butter.
"If prices go up too much (chocolate makers) shift to substitutes and instead of cocoa butter, which gives that melt-in-the-mouth flavor, you can use palm oil, or even cotton seed oil," George believes. “Chocolate prices in the past have remained relatively stable because price points were fixed for consumers.” But this is about to come to an end.
Dry weather conditions
The continued surge in the cocoa price can be attributed to several factors. Weather conditions, such as the drier weather expected in West Africa where around 70 percent of the world's cocoa is grown, is expected to impact heavily on production. If that happens, we are going to see prices shoot up.
In addition, recent currency moves have hit the price of cocoa. The sterling/dollar exchange rate has a direct effect on the price of the crop, as cocoa is primarily traded in dollars, but the price is quoted in pounds on the London exchange. A stronger BP makes cocoa more expensive to buy.
The shortage in cocoa may be more disastrous than some believe. A recent report released by the Washington Post cited data showing that the world consumed more than 70,000 metric tons of cocoa above the amount produced in 2013. Since 2012, it has zoomed by more than 60 percent, forcing chocolate makers to hike up retail prices. The two major chocolate manufacturers, the Switzerland-based Barry Callebaut Group and Mars, Inc., believe that by 2020 the deficit could expand to more than a million, a hefty 14-fold surge. By 2030, the gap could explode to 2 million metric tons.
If the shortage continues, and if prices continue to rise, people seeking emotional pleasure from chocolate may find it far too costly and will not be able to rely on it for their daily dose of nirvana.
Hope breads eternal, however, and when it comes to our velvety brown tablet of indulgence we look for positive signs wherever we can. And indeed, there may be some hope on the horizon .According to the Post report, despite the current drop in the amount of grinding done in Europe, the process has been shooting up in Indonesia which has now become a net importer of cocoa. In addition, an agricultural research group in Central Africa is developing trees that can yield up to seven times the amount of beans traditional cocoa trees can produce.
So hang in there, chocolate lovers. We may still be able to feed our chocolate frenzy without making a bigger hole in our pockets.