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Chocolate Panic Escalates as Cocoa Crunch Sparks Scramble to Buy

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Chocolate Panic Escalates as Cocoa Crunch Sparks Scramble to Buy

Chocolate is hot right now, but not just because Easter is coming. It’s down to shortages and soaring prices of main ingredient cocoa, and “everybody is panicking.” That’s how the head of Guan Chong, one of the world’s biggest cocoa processors, summed up the situation in the market right now.
Prices have skyrocketed, setting new records day after day. They’ve already doubled so far this year to exceed $8,500 a ton, and $10,000 looks like a real possibility. The main reason is poor harvests in West Africa — a result of drought and disease — but decades of underinvestment and insufficient support for millions of impoverished farmers have contributed too.
Malaysia’s Guan Chong is scouring the world for cocoa and paying premiums to book beans from minor growers amid worries that some sellers in top growers Ivory Coast and Ghana may default on supply contracts. It’s looking to buy from countries such as Ecuador, Peru and Indonesia, CEO Brandon Tay Hoe Lian told Bloomberg Newss Anuradha Raghu.
Surging cocoa prices — as shown in these charts — are prompting candy manufacturers to crank out new products with less of the pricey ingredient, or none at all. So far they’ve passed on higher costs to consumers. But the breakneck rally shows no sign of easing any time soon, and major chocolatier Barry Callebaut has warned that acute cocoa shortages will persist into next season.
The crunch is being felt most in Europe, the world’s biggest chocolate consuming region. Incoming EU regulations — aimed at stopping products that destroy forests from being sold in shops — may make it even harder for the bloc’s top chocolate makers to secure supplies. Focus is now turning to the upcoming mid-crop, the smaller of two annual harvests, and Ivory Coast’s regulator expects that to shrink this season, Bloomberg reported this month. For the season as a whole, the world is facing a third straight deficit.
A major worry is that harvest losses triggered by aging trees and crop diseases may prolong the shortfall and turn into a structural supply issue, keeping costs high, Bloomberg Intelligence analysts including Diana Gomes said this week. So you may say goodbye to any chance of cheaper chocolate and Easter eggs for quite a while.
Source : Bloomberg

 

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