Why the cost of chocolate will keep rising

With Easter less than a month away, sweet-toothed consumers in Europe and North America are beginning to turn their thoughts towards chocolate. In the UK alone, tens of millions of milk chocolate eggs will be sold. But prices this year are expected to be higher than ever — and it is very little to do with existing inflationary pressures in the market.

Instead, it is a seemingly relentless rise in cocoa prices in recent months that is pushing up costs. Prices of beans have surged to all-time highs, with cocoa futures in New York more than doubling from the same period last year. On Tuesday cocoa futures in London traded at a record high of £5,827 per tonne. On the same day last year, they traded at £1,968. 

Prices are rising in part because supply is stretched. Poor weather in Ivory Coast and Ghana, which together produce around two-thirds of the world’s cocoa beans, has affected crop yields. El Niño, the sea temperature phenomenon which occurs every three to five years, returned last year, first bringing unseasonal heavy rainfall to the region and then dry heat. The result is a global crop 11 per cent smaller than last year’s season, according to forecasts published by the International Cocoa Organization on Thursday.

Analysts are warning that chocolate makers and brands will pass along higher costs to consumers. If they have not already, they will limit losses by shrinking bar sizes and boosting prices, says Paul Joules, cocoa analyst at Rabobank. Plain bars of chocolate, he said, are also likely to be replaced by fruit and nut bars or other less chocolate-dense alternatives. 

This is not likely to be a temporary situation. While El Niño has catalysed cocoa’s price surge and market speculators have exacerbated it by piling into futures, deep-rooted structural issues underpin the production squeeze. From climate…