See Your Sweet Tooth Is Getting Expensive: Prices for cocoa, the key ingredient in chocolate, have surged to records by Ryan Dezember of The WSJ. Excerpts:
"Cocoa prices have climbed past a record set nearly a half-century ago, costing chocolate makers, bakers and aficionados alike.
The sharp climb in price for chocolate’s main ingredient started with bad weather in West Africa [this would cause supply to shift to the left, raising price], where much of the world’s cocoa is grown. Speculators piling into one of the hottest trades outside of artificial intelligence have added fuel to the rally.
Cocoa futures rose another $1,105 a metric ton over Thursday and Friday to end the week at $8,018 in New York. That is more than three times the price a year ago and 42% above the previous record set in July 1977 during another period of poor growing conditions in West Africa that shrank global supply."
"The cocoa rally began in the summer after a weak harvest diminished stockpiles for the second consecutive year [another fall in supply]. Traders started worrying about the next crop and the El Niño weather phenomenon, which tends to reduce cocoa yields in West Africa.
Hedge funds and other speculators gobbled up cocoa futures, betting prices would rise [demand rises when buyers expect prices to rise in the future-this is the shift factor called expectation of future price-this increase in demand will cause prices to rise now, so it might be called a self-fulfilling prophecy], according to Commodity Futures Trading Commission data. Prices broke out of the range between about $2,000 and $3,000 a metric ton, where they had traded for the past 15 years.
Traders’ fears were realized when West Africa was hit first by unusually wet weather and then blanketed by hot, dry air brought from the desert interior by the Harmattan winds. Plant diseases have been rampant and many cacao trees are past their prime, yielding less fruit as they age." [this would be another cause of the supply reduction if it is unrelated to changes in the weather]
"The International Cocoa Organization . . . expects global production this season to be 11% lower than the previous season. Its forecast for 5% greater demand would leave stockpiles 21% lower."
"Long-term, there are concerns about where cacao trees can be planted as food companies adhere to new European Union rules forbidding the import of commodities produced on freshly cleared forests." [increased regulations also reduce supply]
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