Why chocolate prices are high, and likely going higher

Got a sweet tooth? Now might be a good time to replenish your personal Strategic Chocolate Reserve, because already-high prices for cocoa-based treats are only going up.

Driving the news: The chocolate industry is grappling with a record-breaking shortfall in cocoa production that’s pushed wholesale cocoa prices to an all-time high of US$6,400 per tonne.

  • Forecasters expect a deficit of around 375,000 tonnes of cocoa this year, according to a Reuters industry survey

Why it matters: Yes, this means you’re going to pay more for chocolate. Prices are already up 11% since last year, and will likely continue rising. 

  • However, after years of inflation, consumers are less tolerant of price hikes than they once were, and chocolate sales are falling as producers try to raise prices.

  • That means chocolate makers may have to accept lower margins, a risk that’s showing up in their share prices — Hershey’s stock, for example, has fallen by 19% in the past year.

Why it’s happening: Almost three-quarters of the world’s cocoa is produced in four West African nations — Ivory Coast, Ghana, Cameroon, and Nigeria — and a combination of factors has cratered production in that part of the world. 

  • El Nino has brought unusual weather patterns that have hurt harvests, but the larger problem is that much of the region’s crop was planted 25 years ago and has not aged gracefully — yields are falling year-after-year, and more trees are getting diseases.

Bottom line: Chocolate has been cheap for a long time because of the glut of supply from West African farms, but low prices have made investment in tree re-planting and better agricultural practices uneconomical. Now we’re paying the price.—TS