JPMorgan Chase & Co. predicts a smaller-than-expected chocolate supply shortfall due to rising prices dampening demand. The bank expects a 40,000-ton deficit for the 2024-25 season, down from its previous estimate of 108,000 tons. While cocoa futures have nearly tripled in the past year, reaching nearly $10,000 per ton, companies are trying to offset higher production costs by raising consumer prices.
Rising chocolate prices are predicted to dampen demand this year, leading to a smaller-than-expected supply shortfall , according to JPMorgan Chase & Co. The bank's analysts have revised their deficit estimates for the current 2024-25 season to 40,000 tons, down from their autumn forecast of 108,000 tons. This downward adjustment is primarily attributed to their expectation that demand will decline by at least 1.8 percent as historically high cocoa prices affect consumer consumption.
However, consumers can anticipate continued price hikes for chocolate as companies strive to mitigate their higher production costs. Cocoa futures nearly tripled last year due to concerns regarding supply from West Africa and are currently trading near $10,000 a ton in New York. Recent financial reports from chocolate manufacturers suggest that previously resilient demand is weakening. 'Historically high prices are destroying demand and we look for world grindings to contract by at least -1.8 percent year-on-year,' stated JPMorgan analysts in a research note. Declining sales volumes indicate that consumers are scaling back their purchases.To alleviate cost pressures, the industry is increasingly exploring recipe reformulations, substituting cocoa with alternative ingredients. Hershey's Chief Executive Officer Michele Buck conveyed this strategy to investors on Thursday. This trend echoes the situation in the coffee market, where recent price surges could lead to consumer price hikes in the coming months and subsequently impact demand. Andrea Illy, chairman of Italian roaster Illycaffè SpA, predicts that the recent dramatic increase in coffee prices could result in retail price hikes of 20-25 percent in the next few months. Arabica futures, the high-end beans favored by brands like Illy and Starbucks, have doubled over the past year and are currently trading above $4 a pound. This surge has been attributed to tighter supplies from Brazil, the top coffee grower, and concerns that its next arabica harvest might also be affected by adverse weather conditions
CHOCOLATE PRICES DEMAND SUPPLY SHORTFALL COCOA JPMORGAN CHASE CONSUMPTION COST PRESSURES
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