Chocolate prices closed just short of $3,200 per metric ton last Friday, after rising to a three-year high of $3,284 on Thursday. The Hershey Co. (NYSE: HSY) announced the week before that it was raising its candy prices 8% due to commodity price hikes for chocolate, dairy and nuts. The privately held Mars Candy Co. raised its prices 7% last Thursday as well.
In its announcement, M&M maker Mars said cocoa-bean prices have risen 18% this year as demand has outstripped supply. Dairy products and nuts are also under demand pressure and face as well drought conditions in California, which provides almost half of all U.S. production of fruits, nuts, and vegetables. The state is also the country’s leading producer of milk and dairy products, accounting for 18.6% of all dairy products in 2012.
The good news for those of us with a deeply rooted sweet tooth is that the hikes to chocolate prices may be over. Commerzbank analysts said on Friday, “There is little reason from a fundamental viewpoint for cocoa prices to keep being driven ever higher. … [T]here is also a very good mid-crop being harvested in West Africa” now. If demand and supply are in rough parity, something else must be going on.
ALSO READ: Milk and Beef Price Hikes Gradually Slowing
One possibility is that a trader purchased 3,000 contracts last Monday, betting long on the spread between September and December. That touched off the exchange of 110,000 contracts on Wednesday. Seeing the action, many traders dumped the short positions and may pick them up again before the next settlement date, betting that last week’s action was a blip. Could happen.
Another possibility is that the Ebola virus outbreak in western Africa is threatening to leave a lot of the cocoa mid-crop unharvested. Sierra Leone’s largest cocoa-producing district is also the region of the country that has been hit hardest by the virus, which has caused farmers and their families to abandon their farms in an effort to escape the disease for which there is no treatment and no cure. As of last Friday, Sierra Leone had reported 146 deaths from Ebola and 435 confirmed cases.
The Wall Street Journal reported on Friday that a greater than 40% drop in the value of Ghana’s currency is encouraging cocoa farmers to seek higher prices in Cote d’Ivoire by smuggling cocoa beans across the border to avoid the fixed prices Ghana pays producers for the beans.
If the commodity price for chocolate falls, it is pretty certain that fundamentals have once again taken over. If they continue to rise, well, who knows where they will stop.
ALSO READ: 10 Brands That Will Disappear in 2015
The Average American Is Losing Their Savings Every Day (Sponsor)
If you’re like many Americans and keep your money ‘safe’ in a checking or savings account, think again. The average yield on a savings account is a paltry .4% today, and inflation is much higher. Checking accounts are even worse.
Every day you don’t move to a high-yield savings account that beats inflation, you lose more and more value.
But there is good news. To win qualified customers, some accounts are paying 9-10x this national average. That’s an incredible way to keep your money safe, and get paid at the same time. Our top pick for high yield savings accounts includes other one time cash bonuses, and is FDIC insured.
Click here to see how much more you could be earning on your savings today. It takes just a few minutes and your money could be working for you.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
