With Easter fast approaching, many people are looking forward to a time of joy and celebration. However, according to industry analysts, chocolate lovers can expect more expensive Easter eggs this year. This unfortunate reality is due to soaring cocoa futures prices, which have soared by almost 40% in the last 12 months to reach record levels.
The Price of Cocoa is on the Rise
Cocoa is the main ingredient in chocolate, and analysts predict that prices will continue to rise. This trend is likely to affect Easter baskets this year. Cocoa futures prices have surged nearly 40% over the past 12 months to record highs, as adverse weather conditions have significantly damaged cocoa crop yields in West Africa, the source of approximately 75% of the world’s cocoa production.
The complex relationship between weather patterns and agricultural yields is at the heart of the cocoa crisis. West Africa, specifically countries such as the Ivory Coast and Ghana, plays a crucial role in the global cocoa supply chain. However, in recent years, there has been an increase in extreme weather events, including droughts, floods, and unseasonable temperature fluctuations, all of which have had a negative impact on cocoa production.
Booming Cocoa Prices
Cocoa futures reached a record high of $6,553 per metric tonne this week. According to Jane Foley, head of FX strategy at Rabobank, chocolate prices are expected to increase due to the surge in cocoa prices. Meanwhile, Jeremy Naylor, an analyst at IG, warned consumers not to expect an increase in the price of Easter eggs. He also pointed out that eggs are now smaller for the same price.
How Will High Cocoa Prices Affect Easter Egg Affordability?
For those who love chocolate, the news of more expensive or smaller Easter eggs may be difficult to accept. In the words of Rabobank analyst Jane Foley, the expectation is that chocolate will be more expensive because there has been a spike in the price of chocolate.
Given that the price of cocoa futures has risen by nearly 40% over the past year, the question for chocolate manufacturers and retailers will be how much of the extra cost can be passed on to consumers without reducing demand. Some analysts predict that customers will face a combination of higher egg prices and smaller sizes.
Companies often resort to "shrinking inflation" by reducing Easter egg sizes to keep prices affordable for consumers. Therefore, it should not come as a surprise if the eggs purchased this year appear smaller than usual.
Long-term Effects
Persistently high cocoa prices could drive up costs for chocolate makers over the long run, not just for seasonal items like Easter eggs. If yields in top-producing countries were to remain constrained, cocoa prices are likely to remain high, putting further pressure on chocolate companies' profit margins.
Large multinational firms may be able to diversify their supply chains by sourcing cocoa from other regions. However, smaller chocolate makers may struggle with chronically higher costs, which could threaten the affordability and availability of artisanal and gourmet chocolates.
All in all, rising cocoa prices primarily affect the production costs of chocolate companies. But consumers are also likely to feel the effects through more expensive, smaller or harder to find Easter eggs and chocolates. This situation highlights how events such as poor weather in distant parts of the world can have economic ripple effects that reach store shelves and impact people's daily lives.