Global supply pressures and El Nino weather patterns mean chocolate is not likely to get cheaper any soon, economists say Photo: Solomons Gold
Bad news for chocoholics - their favourite treat is expected to get even more expensive, as global supply chains struggle to meet demand.
Earlier this year, Wellington-based family business Whittakers announced it was struggling with increasing costs, resulting in a standard block of chocolate jumping in price by at least a dollar overnight.
RaboResearch associate analyst Pia Piggott told Afternoons global factors had been contributing to rising costs in the key ingredients used to make chocolate, partly due to reduced supply of them, and that pattern looked set to continue. So chocolate lovers should brace for the pain in the pocket to continue.
"We're seeing something particular with chocolate because of the cocoa market," Piggott said. "This past year alone we've seen significant rallies in cocoa - up 27 percent this year, and sugar up 20 percent.
"Most cocoa is produced in West Africa, and for the past two years they've had really poor growing conditions - a lot of wet weather that's caused rotting and disease from the cocoa trees, and that's left two years of supply deficit - demand is outweighing demand for two years."
El Nino weather patterns were also expected to affect global crops.
"There's expectations that we could see a third year of cocoa supply deficit. So while demand is quite stable and supply is declining, that's going to keep pushing up prices for cocoa," Piggott said.
About 50 to 60 percent of most chocolate bars were made up by sugar, she said. But many countries had been producing less and less sugar, and El Nino could mean that trend continued, and there could be a deficit if those weather patterns become severe.
While production of ingredients had slowed, demand for chocolate had not, even for luxury producers who had reported rising their costs.
"Everyone still wants a little bit of indulgence and still wants to enjoy chocolate."
Shinkflation could happen down the line, "if these prices are going to continue to stay elevated" Piggott said.
Milk, the third of the main ingredients in chocolate, was the only one the forecasts looked favourable for.
"Last year we had record dairy prices ... but this year it's more normal trading conditions, there's a lot more milk supply in the global market, so that's providing a little bit of relief."
Another positive front was that shortages of some fruit and vegetable supplies in New Zealand caused by extreme weather events were beginning to work their way out of the system.
"In Australia and New Zealand, the wet weather conditions have receded, which is very positive, and we're seeing abundant supplies of some fruit and veges, as well as some acute supply shocks that are still going through the supermarkets."
