COCOA PRICES SOAR IN WORLD MARKETS

Soaring cocoa price

to hit chocolate makers

ROWENA MASON & AMANDA SAUNDERS, The West Australian June 8, 2010, 7:05 am

A soaring price for cocoa is expected to make chocolate more expensive.WA News / Robert Duncan ©

A shortage of cocoa is threatening to force prices for chocolate higher.

Cocoa prices are at their highest levels since 1977, mainly because of a plant disease blighting the crops of thousands of cocoa growers in the Ivory Coast, which accounts for almost 40 per cent of the 3.5 million tonnes of cocoa that end up as plastic-packaged chocolate bars and luxury boxes of truffles across the globe.

Swollen-shoot viral disease, heavy rain and poor infrastructure have cut the Ivory Coast’s production by 20,000 tonnes compared with the year before. The crop failures, together with a forecast fifth year in which cocoa demand will outstrip supply, have sent cocoa futures soaring.

In early trading last night, the benchmark contract for cocoa on the London International Financial Futures and Options Exchange was at a 33-year high of £2553 a tonne, up from just £600/t only 10 years ago.

Margaret River Chocolate Company co-owner Martin Black said the retailer had felt upward price pressure from suppliers for the past six months, with wholesale prices for cocoa rising 10 to 15 per cent over the period.

“We haven’t let it affect our prices at a retail level and are just hoping that the fluctuations in the markets will pan out again,” he said.

“But if it continues on this upward trend for another few months we will probably have to start reviewing some of our in-store prices.”

The Margaret River Chocolate Company’s main supplier is international cocoa giant Barry Callebaut, which sources about 90 per cent of its product from Africa. However, Mr Black said the biggest issue facing the company was futures trading in cocoa, which had hurt the chocolate industry.

“Most of the cocoa trading done in recent years is not among people who use cocoa, it is speculators and traders seeking a safe haven away from equity markets and property markets,” he said. “It artificially inflates prices for the people who want to buy cocoa to make and sell chocolate.”

One rumour sweeping London last week was that a major trading house had bought a very large position in cocoa for delivery in July, throttling liquidity in the market and driving up prices.

Jenni Blance, an owner of Chokeby Road in Subiaco, said it was possible the price of stock would rise next financial year if suppliers passed on increased costs. She said Lindt had already signalled it was increasing prices for its bars and Chokeby Road would have no choice but to pass on the rise next month.

Mr Black said sales at the Margaret River Chocolate Company, which sells about 100 tonnes of chocolate a year, had held up well over the past two years, despite tougher economic conditions.

“People are acquiring a taste for better-quality chocolate, so we have found even though the market has been tough globally for the last couple of years and the price of sugar and milk are also peaking at the moment, sales are holding up relatively well,” he said.

WITH TELEGRAPH GROUP, LONDON
Sourced & published by Henry Sapiecha

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