New York - Buying your sweetheart a box of chocolates for Valentine’s Day could be cheaper this year thanks to booming cocoa supplies.
Growers are collecting bigger harvests in Latin America and West Africa, which accounts for about 70 percent of global production.
The output gains have pushed cocoa futures to the lowest since 2008, cutting costs for companies including Mondelez International, the maker of Cadbury chocolates and Oreo cookies.
Declines in the futures market are starting to translate into cheaper confections. That is good news for romantics, since a survey by the Washington-based National Confectioners Association found that 70 percent of Americans would give chocolate or candy to their Valentine.
The goodies will probably stay cheap even beyond the amorous holiday.
Hedge funds are making a record bet that cocoa prices will keep slumping.
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“Production is going to be much higher, and that’s why prices are falling,” said Donald Selkin, the New York-based chief market strategist at Newbridge Securities who helps to oversee about $2 billion (R26.6 billion) in assets. Money managers had a cocoa net-short position, or the difference between bets on a price decline and wagers on a rise, of 24320 futures and options as of February 7, according to figures from the US Commodity Futures Trading Commission published three days later. That was the most bearish holding in the data, which starts in 2006.
The funds have been negative since mid-December.
Cocoa sank 31 percent in the past year on ICE Futures US in New York, touching an eight-year low of $1951 a metric ton last week.
Prices slipped 0.5 percent to $1953 a ton on Monday.
After dry weather hurt West African crops last season, growing conditions have improved and supplies rebounded.
Stockpiles at ICE-monitored warehouses have jumped 38 percent since reaching the lowest since 2009 in December. UBS Group and Citigroup are both projecting that global production will outstrip use this year as harvests expand.
The supply gains have come amid slowing demand. Global chocolate sales dropped 2.3 percent in the three months to November, according to Barry Callebaut, the world’s top cocoa processor.
Although people are eating less chocolate in favour of healthier options, they are a bit more likely to throw caution to the wind when it comes to Valentine’s Day.