In 2022 as a result of the Ukraine conflict, the price of most gains soared. But last year when the price of most soft commodities subsided, the sugar and Cocoa prices rose significantly. These are the most important ingredients of candies and sweets. Cocoa prices have soared over 82% in the last 12 months in the futures market. The price is at 46 years high.
The El Nino weather pattern combined with the global climate change heats the harvest of sugar canes in Brazil and India, Cocoa bean trees in Ghana and Ivory Coast and even Olive harvest in Spain, the producer of more than half of global olive oil supplies.
Thanks to the futures market, the prices are not transferred to supermarket shelves very fast. The future market works as a buffer smoothing the price curve for the retail customers. That is because many producers of candies and sweets had fixed their supply price through future contracts. However, if the price remains high, it will be reflected on the shelves anyway. The cost of sugar and candies rose almost 9 percent for the customers in the United States. Many large confectionery companies warned that the price increase will continue in 2024.
The law of demand states that as a good’s price increases, there will be less people demanding it. The extent to which the price diminishes is measured by the elasticity of demand.Â
Sweets appear to be inelastic for the customers. It means despite this 9 percent price increase (which is completely above average price increase of customer price index CPI) the customers did not diminish their demand yet.
Source: Economist
