It's a familiar story: A global commodity shortage looms as surging demand from rapidly industrializing Asia outstrips sources of supply. Political instability in the Third World further crimps production, and speculation on futures markets adds to the pressure on prices.
This could be the tale of oil in years past, or of nickel more recently. But the commodity in question is something much less conspicuous – and ultimately much more delicious: the cocoa bean.
Growing appetites for chocolate in China and other parts of Asia will mean global demand for cocoa beans will outstrip supply for the second straight year, according to the London-based International Cocoa Organization.
In a country of more than 1.3 billion people, even a slight rise in consumption can mean a strain on global cocoa markets.
Crop shortages are already pushing up prices, and some in the industry are predicting that stagnant production will result in a massive cocoa deficit by the end of the decade.
In response, 12 chocolate companies, including Nestle, Mars and Barry Callebaut, on Wednesday said they have signed a joint agreement with the governments of Côte d'Ivoire and Ghana – which together produce more than half the world's cocoa beans – to improve planting and fertilizing methods used by 300,000 farmers. All sides have agreed to safeguard against the use of child labour, which is a black mark on the global chocolate trade.
Chocolate prices on the store shelf have been edging higher, and consumers should expect more increases as markets await the size of the fall harvest in West Africa, said Jack Scoville, a vice-president at Chicago brokerage Price Futures Group.
Consumers in emerging markets who are enjoying rising incomes are eating more red meat, buying more cars and, of course, indulging their taste for sweets. Chocolate does not have a long history in Asia, where the average person eats just 50 grams a year of it, the equivalent of one chocolate bar. In chocolate-loving Switzerland, by comparison, the average person eats 12 kilograms of chocolate.
"Everybody's developing a taste for chocolate and cocoa-based products, so you're seeing demand really ramp up in that part of the world," Mr. Scoville said. "Of course, Canadians can't live without their daily fix of Hershey bars either."
Cocoa futures have risen by about 25 per cent in the past year in the ICE market in New York, and touched a record of more than $3,000 (U.S.) a tonne in March.
Also driving demand for the beans is the buzz over dark chocolate's reputation as a vitamin-rich treat that can help reduce blood pressure, among other health benefits. And then there's the demand for artisanal food.
Since opening his Toronto chocolate shop in 2003, David Castellan has seen firsthand the rise in demand for high-end, handmade chocolates, especially ones that can be traced to specific plantations in West Africa, where the beans are grown by workers who are treated properly.
"Everyone's really interested in chocolate these days, and interested in food," said Mr. Castellan, co-owner of Toronto's Soma Chocolatemaker, which has two downtown shops at which raw cocoa beans are turned into $2 truffles or 80-gram bars that cost $8.25.
Mr. Castellan isn't bothered by the recent rise in cocoa prices. He buys small amounts, and pays the equivalent of $12,000 to $15,000 a tonne for high-end beans.
Michael Segal, a spokesman for the International Cocoa Organization, dismissed any suggestion consumers were facing a severe chocolate shortage.
"Absolutely not," he said. "We have predicted that there will probably be a small deficit, of the order of this year's or smaller, each year for the next five years, but this implies no significant shortage."
West African countries Côte d'Ivoire and Ghana grow 55 per cent of the world's cocoa, followed by Indonesia. Political unrest and dry weather in Côte d'Ivoire have contributed to smaller harvests for the past few years. This year, the global crop was 4 per cent larger, which helped slow the rise in prices.
But increasing the size of the crop and the amount of cocoa grown per acre is tough, given the world's supply of cocoa trees is aging and becoming less productive. And it can take up to five years before a new cocoa tree yields a crop, so farmers are more apt to plant a crop that provides a faster return. At the same time, cocoa growers are using unsophisticated techniques – fertilizer and pesticide use is scarce – and the average plantation is only about six acres.
"West African cocoa farming is characterized by low productivity, unorganized smallholders mostly engaged in family farming on literally tens of thousands of small plots, using mainly old techniques and being susceptible to many problems including lack of credit to develop farms," Mr. Segal said.
"There is great potential in that region for development of production to the levels, including yield levels, of some of the more efficient producers in Asia and Latin America, but the problem mainly would be the huge investments that would be required to do this effectively across the region."