Why Chocolate Prices Are Going Bananas


Photo-Illustration: Intelligencer; Photo: Getty Images

Inflation is messing with our chocolate. This spring — the season of edible Easter bunnies and Cadbury eggs — has been a drain on the bank accounts of America’s chocoholics. Splurges have been disappointing, with, say, noticeably less chocolate cookie dough in a pint of Jimmy Fallon’s ice cream.

Yes, everything costs more now, and there are other important things to worry about affording. On Wednesday, the Bureau of Labor Statistics released its monthly inflation survey, the consumer price index, and it had shot up 3.4 percent, more than expected — with higher rent and gas prices making up most of the cost increases. Most people’s chocolate bills don’t come anywhere near those other monthly expenses (and if they do — good for you!). Yet, with the cost of candy and snacks well outpacing inflation, it is somehow even more insulting — can’t we have a little bit of Godiva without all the financial guilt, too?

It turns out that the cost of the indulgence is one of those things that the U.S. financial system has just about zero control over. For the past few months, cocoa prices on the futures markets — where traders buy and sell contracts for their delivery — have shot up to their most expensive ever, more than quadrupling over the past year to $10,000 per ton. The reasons for this have to do with climate change, exploitative labor practices in West Africa, and the rapaciousness of the financial markets. According to Bloomberg, the vast majority of the world’s cocoa, the main ingredient for chocolate, is harvested by small farmers in Ghana and the Ivory Coast, which have experienced both drought and flooding during recent growing seasons. Those farmers are paid little — their wages are set by the government — so they can’t plant more cocoa trees to replace the ones killed by extreme weather or buy pesticides that would fend off blight.

Meanwhile, financial markets have exacerbated the problems. Bloomberg columnist Javier Blas pointed out that commodities traders, who normally hedge their bets — and, therefore, help restrain market prices from going haywire — have seen their normal trading strategies fail. (Hedges are a cheap way to keep unforeseen risks from blowing up a trade.) The run-up in prices has been so steep, and so fast, that anyone betting in any direction besides up would go bust. Since those hedges are so unprofitable, traders are buying up futures contracts just to cover costs. (And, naturally, make a profit.)

Has anybody thought through the world-historical consequences of all this? Since chocolate is (sort of) good for your heart and (maybe) an aphrodisiac, the world’s population is (theoretically?) at risk. Chocolate consumption is also (dubiously) linked to the number of Nobel laureates produced by the world — so without it, who will be smart enough to fix this problem for the rest of us?

Unfortunately, there is just not much that can be done. The U.S.’s main tool to fix inflation overall is for the Federal Reserve to keep interest rates high — which is what the central bank will probably do for the foreseeable future. But that’s not going to lead to any more cocoa trees being planted throughout western Africa. Meanwhile, the generationally high prices for cocoa futures are, well, probably going to persist well into the future. Those costs will continue to trickle down to bakers, confectioners, and bodegas selling candy bars. The next time you have to ask yourself if you deserve a treat, you might have to consider whether you can afford it too.

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