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Sweet cravings across Asia make chocolate more expensive

Now here's some depressing news: chocolate, the great mood lifter, is getting more expensive.

It's enough to leave a bitter taste in your mouth. The price of cocoa has soared close to three-year highs, surging 45.7 per cent since March last year, while cocoa butter - the main ingredient for chocolate, derived from the cocoa bean - has almost doubled, rising about 96 per cent.

Chocolate cravings across Asia, which is experiencing a rapidly growing middle class, have been linked to the price rise, with chocolate makers already passing on the cost to shoppers.

Upmarket confectionary maker Haigh's, which will celebrate its centenary next year, has increased the price of its products by an average of 3 per cent.

"There is no denying at the moment that world stockpiles are reducing because of that increase in demand [from Asia]," said its chief executive, Alister Haigh.

"Obviously it squeezes margins and we have had to have a price increase recently to help offset that."


Mr Haigh expects cocoa prices to remain high, considering that it takes about five years from planting a cocoa tree to harvest a commercial crop.

But he said another chocolate price rise was unlikely, with supply likely to increase. 

Governments in cocoa-producing nations, located about 10 degrees either side of the equator, are encouraging farmers to plant more crops.

Indonesia's Trade Minister Muhammad Lutfi said in May that he hoped to lift the country from the world's third- to second-biggest cocoa producer in the next three years. This would effectively double the nation's production.

"Supermarkets, mini-markets are growing everywhere,” Mr Lutfi said at an industry conference in Bali, which Mr Haigh attended. "They sell chocolate and people will buy more." He didn't give consumption numbers.

"We also have to increase production. We have to consider how we can continue supplying beans to the global market." 

The International Cocoa Organisation is forecasting a deficit of 75,000 tonnes in the year to October 1, down from a shortfall of 193,000 tonnes in 2012/13.

"It is remarkable how production tends to turn around," said Mr Haigh. "Because prices go up, farmers tend to take a bit more interest in their crops."

He said cocoa had struggled to compete with higher yielding crops such as palm oil and rubber. But he said the Indonesian government had told farmers that the three crops could co-exist.

"Cocoa trees by their nature need a canopy over them, so it is possible to work them together."

But it's not just global price movements that dictate the price of your favourite chocolate bar. Mr Haigh said currency fluctuations as well as changes to labour and power costs also control margins.

Mr Haigh said when the Australian dollar, which was fetching just under US94 cents on Friday, traded below US90 cents, it added about 10 per cent to the company's cost.

"Now its about US94 cents, that helps us," he said. "Small improvements can make a big difference. If the carbon tax comes off and our power gets a bit cheaper because we use a bit with air conditioning in the summer months, that will help things a bit.

"And because so much of our product is handmade, we have a very high labour content. What happens with wage increases and superannuation increases probably impacts us as much if not more than the price of cocoa."

With Bloomberg