A Chocolate-less World or Higher Prices?

There have been lots of news stories lately indicating that “We are running out of chocolate”. Particularly, two companies, Mars and Barry Callebaut, have come out and supported this statement. (See examples, here, here and here.) The fear is that there will soon be not enough production of cocoa compared to what is demanded. On the demand side of things, countries other than those in Europe and America are beginning to love chocolate, such as China. Further, there is an increase in demand for “healthy” chocolate or dark chocolate. Dark chocolate has on average 50% more cocoa than the traditional milk chocolate bars. On the supply side, there is a decrease in production mostly attributable to frosty pod, a fungal disease that has wiped out 30-40% of cocoa production in South America. (The fungus eats the cocoa pod and leaves them at a total loss.)  This has shifted most (70%) of the world’s cocoa production to Africa, which is experiencing extremely dry temperatures. In addition, environmental pressures on cocoa farms have led to an increase in production costs.

CacaoPods2

As a result, there consumers should expect two effects. One, agricultural groups are trying to develop new trees and technologies to increase the amount of cocoa beans. However, a tree variation likely means a change in the taste of chocolate. Second, we eat 70,000 metric tons of cocoa more than what is produced each year and an expectation of 1,000,000 metric tons by 2020. So, prices will be expected to rise on chocolate. The truth is, we are less likely to “run out of chocolate” if the price mechanism is permitted to rise, i.e. if the government does not cap chocolate prices at some nominal level. Rather, supply and demand determines the equilibrium market price.  There is little evidence of government setting chocolate prices around the world, but it is something consumers should be wary about. Personally, I would rather pay $10/bar of chocolate than live in a world where there is a shortage of chocolate.

 

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2 thoughts on “A Chocolate-less World or Higher Prices?

  1. I agree. Do not change the consistency of cocoa and how it is harvested. I’d rather have the chocolate less frequently but still enjoy the taste and pay for that privilege.

  2. Not sure there is any danger of price ceilings for chocolate…although, for approximately half the population, chocolate may be considered a public good… 😉

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