Mumbi Gitau and Dyanne Sousa of Bloomberg are reporting that extreme weather and crop disease are creating a tight supply of cocoa. They write:
Cocoa futures extended their surge to a record in New York as a shortfall gripped the market, threatening to make chocolate and other confectionery costlier.
Prices have doubled during the past year as growers in West Africa — who produce the bulk of global supply — are battered by extreme weather. Earlier rains promoted the spread of crop disease and delayed harvesting. That has been followed by a seasonal dry spell, which could further crimp production.
Consumers are already shelling out more for treats, and the cocoa rally is set to hurt results of chocolate makers like Hershey. High commodity prices will limit earnings growth this year, executives of the Hershey, Pennsylvania-based company said Thursday. […]
Deforestation regulations recently enacted in the European Union — which take force from late this year — may add to the price upside. The bloc is the world’s biggest cocoa consumer and it will take time for the market to adjust to the data and traceability requirements to meet the standards.
“Consumers will need to understand that it will cost a bit more in the near-term, but in the long-term it will be good for the environment,” Davis said.
Read more here.
