Bloody Valentine's: Cocoa Prices Crush Chocolate Margins During Peak Times

f?id=49955b0e4b5437b40022cb55&maxX=295&m

A supply shortage caused by a crop disease in Ghana and the Ivory Coast is pushing cocoa prices higher at a time when most commodities are getting slaughtered. And because of the global recession, candy makers feel they have little pricing power when it comes to chocolate this year.

WSJ: Some chocolate makers that were willing to raise prices last year remain wary of further increases. Godiva Chocolatier Inc. hasn’t raised prices in at least six months, said Jim Goldman, president and chief executive. Instead, it has economized on packaging and replaced higher-cost truffles with solid chocolate in its boxes. “We are very mindful of the environment we are operating in,” Mr. Goldman said.

The chart below says it all. We’re wondering, is anyone doing the the Cocoa-AIG Commodities Index arb trade, betting that the price of the two will reunite somewhere in the middle after the crop disease is worked out?

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.