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NEW YORK - Chocolate lovers may notice their habit is getting more expensive in the coming months, following a rally that sent the price of cocoa close to a four-year high after a drought hit the world's key grower.
A withering dry spell that farmers called the worst in living memory has hit Africa's Ivory Coast, the main grower of cocoa beans used to make chocolate. This, combined with tight supplies, has caused price spikes in New York and London cocoa markets.
"I think [chocolate] prices may go up but I also think it will be a product-by-product increase," Erin Ashley Smith, an analyst who follows the confectionary market for Argus Research Company in New York, said in a phone interview.
Germany's chocolate industry - Europe's largest - would have to consider raising the retail chocolate price if cocoa futures remain this high, said Karsten Keunecke, joint chief executive of German confectionery industry association BDSI.
"When commodity prices undergo sustained rises as is now happening, industry must re-examine how it calculates its prices and its raw-material purchasing costs, otherwise it cannot survive in the long term," Keunecke said.
His view echoed that of the chief financial officer of Swiss chocolate maker Lindt & Spruengli's, Dieter Weisskopf, who said this week he saw cocoa prices rising in 2007.
With the drought in parts of West Africa killing off younger cocoa trees and reducing the yield potential on others, a question for some analysts is the timing of any price rise which could show up on retail shelves.
Large companies typically keep large inventories and can take up to six months to implement price hikes once they are announced.
- REUTERS
