Expect to Pay More for Your Halloween Candy This Year
Supply and demand is always a key factor for commodities be they food, energy, metals or another kind. While oil supply-demand has been the big driver of commodity talk and companies from Kroger (KR) to Sprouts Farmers Market (SFM) are talking food deflation, all may not be well in the candy aisles this Halloween season given the current cocoa crunch. One has to wonder if candy shoppers will shift to non-chocolate varieties or try to once again reformulate their offerings. Good news for other parts of candy portfolios from The Hershey Company (HSY) and Tootsie Roll (TR), but not good for chocolate bars. Was that a collective sigh we just heard from half the US population?
A lack of beans and lower quality has limited grindings in producing countries and caused the price of cocoa butter, which accounts for about 20 percent of the weight of a chocolate bar, to spike ahead of the peak demand period, when chocolate makers are preparing for Halloween and Christmas. The cost of cocoa butter relative to bean futures, the so-called ratio, climbed 24 percent this year, according to KnowledgeCharts, a unit of Commodities Risk Analysis.
Source: Cargill Sees Cocoa Crunch Lasting Until Surplus Crop in 2017 – Bloomberg
