Buyer beware: Supply concerns could drive up chocolate prices

That Snickers bar could cost you a little more money in the not-so-distant future. According to a recently published report, the price of chocolate foods could rise as supply shocks hit the industry.

Cocoa prices have surged since November's disputed presidential elections in the Ivory Coast, which remain unresolved. The West African country is responsible for the majority of the world's cocoa production, but a bitter standoff between the internationally recognized victor, Alassane Ouattara, and incumbent Laurent Gbagbo has resulted in a surge in prices. In a bid to cut off funding to Gbagbo, Ouattara has banned exports of the commodity and prices have jumped since - though they have fallen 20 percent since early March as an end to the conflict seems could soon occur. 

Nonetheless, there has been a reduction in the size of cocoa supplies around the world as burgeoning global demand has all but eclipsed stockpiles. That convergence of supply and demand fundamentals has driven the price of cocoa higher, said Blommer Chocolate Company president Peter W. Blommer. "There's been clearly over the last couple of years, a reduction in unit size of a lot of products. That's really a manifestation of demand rationalization," Blommer told Reuters in an interview.

Also contributing to the price rise is the aging cocoa farmer population. According to analysts, many cocoa farmers do not know how to improve their yields, which is worrisome because the industry must increase its annual production by 1 million metric tons - or 25 percent - over the next 10 years if is to keep up with a growing global population. West Africa accounts for 70 percent of world cocoa production, but it is increasingly difficult to help farmers there and encourage young workers to go into the industry, experts assert.

"Young people don't want to work on farms in isolated areas," said Armajaro's CC+ fund portfolio manager Pamela Thornton. Echoing that concern, Blommer said "We're talking about the next 10 years seeing a significant supply crisis, so yeah, I am concerned." The price rise could start affecting consumers when they're paying for chocolate-based goods,  warned.

"If cocoa prices continue to go up and the supply issue becomes more acute, I think you'll probably see more of those types of products that are marketed, just because of price," Blommer affirmed.