Kiwi Drought Hits Choc-lovers

The price of Christmas chocolates look set to surge as the cost of key ingredients – including New Zealand milk – squeezes manufacturing margins. Milk powder prices have risen 50% in the year to August, while cocoa butter has jumped nearly 70%, leading to a 31% increase in the cost of making a bar of milk chocolate.

Dutch lender Rabobank told the Financial Times that milk prices were adversely affected by drought in the world’s largest exporter, New Zealand, and in the US, while increasing demand in China and Russia also contributed to the rise.

“The world has been very short of milk,” commented senior analyst Kevin Bellamy, and he expected prices to remain high well into next year. A supply imbalance accounted for cocoa butter inflation and benchmark cocoa prices in London hit a two-year high of £1,743 a tonne last week.

All of which is dismal news for chocolate lovers as Christmas approaches.

While large manufacturers, which tend to have long-term supply agreements, can absorb the costs short term, smaller chocolate makers will need to increase retail prices to protect already tight margins, the newspaper comments.

Milk, cocoa butter and sugar account for about 80% of the cost of making chocolate.