Sugar rush: Will chocolate makers turn away from thrifty cocoa habits as prices fall on a supply surplus?

 
Courtney Goldsmith
Follow Courtney
UK's Most Expensive Easter Egg Unveiled
After reducing the amount of cocoa in their chocolates last year, confectioners could be in for a sugar rush (Source: Getty)

As cocoa heads for a supply surplus this year, chocolate makers are set to benefit from cheaper prices.

In 2016, a number of confectioners reduced the amount of cocoa in their chocolates in an effort to reduce costs amid high prices, but since last August, the price of cocoa has dropped 40 per cent.

"Consumers concerned that that their Easter eggs will be light on chocolate need not worry with prices this low," said Nitesh Shah, commodity strategist at ETF Securities.

Read more: We judge this year's finest and feeblest chocolate eggs

Favourable weather led to a good crop in Africa, where 70 per cent of global cocoa is harvested, reversing the supply deficit the market initially assumed. The surplus will be the highest in six years so it is set to weigh heavily on prices, Shah said.

Confectioners, who only last year were reducing the chocolate content of their bars, may be less thrifty this year.

Read more: Cocoa floats well: Hotel Chocolat revenue and profits rising after IPO

The International Cocoa Organisation's (ICCO) latest supply and demand forecast said supply will increase by 14.8 per cent to an all-time high of 4.6m tonnes in 2016/17. Meanwhile demand will only rise 2.9 per cent to 4.2m tonnes.

Yesterday, July London cocoa prices finished down £18, or 1.12 per cent at £1,585 per tonne, while July New York cocoa finished down $21, or 1.06 per cent at $1,967 per tonne. This is nearing the four-week low seen in the previous session as a decline in demand for chocolate confectionery hurt sentiment.

However, Shah said demand for cocoa could still make a stronger comeback this year than the ICCO anticipates as chocolate makers take advantage of low prices.

Read more: A greenhouse in Reading could save the world’s cocoa supply

Related articles