An ongoing drought in Western Africa, coupled with continuing unrest in the Ivory Coast - the world's biggest cocoa producer - and a rising consumer demand for cocoa-rich dark chocolate has raised concerns about the potential of a shortage in supply.
As a result, cocoa futures have been trading at three-year highs, with prices rallying since the beginning of the year.
'In the last few months, cocoa prices have rallied on expectations for a smaller crop from the Ivory Coast and Ghana' said Boyd Cruel, a senior analyst at Alaron Trading who specialises in the cocoa market.
In general World production of cocoa is down 5.5% on a year-over-year basis from 2005-2006, according to the International Cocoa Organization and cocoa's price has risen 44% since November 2005.
But don't fret at the thought of a $5 Mars Bar just yet. Cruel said that markets have already factored in the supply issue. The highs reached this week are technical in nature, he said, because news of the drought has been out for months.
Other commodities analysts agree including Barclays' Sudakshina Unnikrishnan who told Bloomberg News from London 'On the fundamental side, we don't expect to see changes in demand'.
'Going into the second quarter, the real wild card continues to be based on the conditions and political situation in Ivory Coast'.
For the sake of all chocolate lovers the world over, let's hope the situation doesn't pan out to our worst case scenario.
Article posted by Spencer Samaroo, Managing Director, Moo-Lolly-Bar
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