Chocolate As Expensive As Caviar? That's Absurd

Chocolate lovers, who are facing price hikes in the wake of record cocoa prices, can take solace in one thing:  the cost of their deliciousness likely will never reach the level of caviar.

That prediction was made last year by the Nature Conservation Research Council and was carried on NPR, the U.K.’s  Independent newspaper and a host of other media outlets.  The group’s head, John Mason,  is quoted by the Independent as saying “In 20 years chocolate will be like caviar. It will become so rare and so expensive that the average Joe just won’t be able to afford it.”

That’s a pretty bold statement to make.   Forecasting cocoa or any commodities markets for 20 weeks is pretty difficult.  Predicting what the world will be like in 20 years is at best an educated guess and at worse like throwing a dart at a target blindfolded.    It also is a tough metaphor to prove since these products are sold in vastly different quantities.    One product is plentiful and the other rare.

Prices for chocolate’s main ingredient at a 30-year high of about $3,340 a ton on the New York Mercantile Exchange.   Caviar, one the other hand, sells between $90 and $150 an ounce.   There are 35,273 ounces in a metric ton.    So theoretically, a ton of caviar would cost about $3.5 million.

To be sure, chocolate prices are headed higher which will squeeze the profit margins of Hershey Co.  (NYSE: HSY), Campbell Soup Co.  (NYSE: CPB), maker of Pepperidge Farm cookies, General Mills Inc.  (NYSE: GIS), whose brands include Betty Crocker, Haagen Daas and Pillsbury, and other food companies, grocery chains and retailers.    The situation is especially bad in the Ivory Coast where there is a political stand-off over who should be the president of the world’s largest cocoa exporter.

Bloomberg Businessweek reported that some are predicting that prices may rise another 14%  should an export ban be continued through may.  As the news organization notes, it’s a dicey situation.

Exports, accounting for 34 percent of global supply, were banned Jan. 24 by Alassane Ouattara, the internationally recognized winner of disputed presidential elections. The decree, combined with a lack of financing and trade restrictions imposed by the European Union in January, meant a 99 percent slump in the registration of beans for shipment in the two weeks ended March 3, the latest port data show.

Cocoa has risen 18 percent since the November elections, adding pressure to world food prices the United Nations says reached a record last month. Ouattara this week extended the ban until the end of the month. Another extension may take it into the mid-crop, the smaller of two annual harvests that starts in April.

The political stand-off will get resolved because there is too much money at stake.   Chocolate sales are pretty recession resistant too.  Market researcher Mintel says that US seasonal chocolate sales rose 16.3% between 2005 and 2010.

Of course as long as supply doesn’t meet demand, prices will remain high.  Maybe chocolate lovers will have to start munching on something affordable like carrots.

—Jonathan Berr