Cocoa prices sweet news for farmers

March 29, 2002 Posted: 12:45 PM EST

By CNN's Liz George

Eventually the higher cost of cocoa beans will be passed on to consumers

LONDON, England (CNN) - Handmade chocolate eggs make for a real Easter treat -- but they come at a premium.

And with the price of cocoa beans closing in on 14-year highs of $1,500 a ton, luxury chocolates could be getting even pricier.

"During the last couple of seasons, climatic conditions have created a deficit of production over consumption, and we've lost something like a third of the world's stock in the last two seasons, or we will do by the end of this season," says Jonathan Parkman of Credit Lyonnais Rouse.

While climate affects commodity markets, there's a long money chain before the cost of the bean sifts through to the truffle.

CNN NewsPass VIDEO Liz George reports on the chocolate industry and whether the rise in the price of the raw material will effect the price of an Easter egg. Play video

Cocoa bean prices account for less than 20 percent of the price of chocolate. The cost of labour has a bigger influence -- especially when you're talking about handmade chocolates.

In the short term, chocoholics won't see prices rising. But eventually the cost of the raw material will feed through, and chocolate makers will start passing it on to their customers.

In the meantime, high commodity prices will help farmers who grow the beans.

The bulk of the beans used for mass-produced chocolate come from the Ivory Coast, where political changes years ago set the producers competing in a free market.

Higher prices will help Ivory Coast farmers who grow cocoa beans

"Initially when the system in the Ivory Coast was liberalized, the farmers suffered considerably, their income dropped by at least 50 percent while the cocoa prices crashed at that time," says Parkman.

"Now we're seeing a reaction to a shortage. Certainly this season they have seen the benefits. And I think the outlook for cocoa growers is actually quite good for the next season or two. They should finally start to see fair returns for their product."

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