Chocolate lovers shrug off Omicron, driving up cocoa prices

NEW YORK (BLOOMBERG) - Demand for chocolate is staying strong even as the Omicron virus variant sweeps across the globe. Americans are devouring candy with Christmas season just finished and Valentine's Day and Easter holidays coming up. Retail chocolate sales are climbing more than 5 per cent a quarter, according to data from Chicago-based researcher IRI.

At the same time, there are signs of tightening supplies with top shipper Ivory Coast sending fewer cocoa beans to ports. All of that is driving up prices for cocoa, the main ingredient in chocolate.

Futures in New York touched a two-month high Tuesday (Jan 11). The rally is a turnaround for cocoa, which was one of the worst commodity performers last year amid ample supplies.

Ironically, that oversupply is now helping chocolate, since it's one of the few commodities that hasn't seen inflation and remains relatively cheap. That's helping the industry avoid the challenges of higher costs, which is hurting other sectors.

Grinding, a measure of demand, rose 1.7 per cent in December in Ivory Coast. In the season started Oct 1, arrivals of beans to ports slid 4.7 per cent through Jan 9.

With exports down, buyers are tapping domestic chocolate reserves instead. Certified stockpiles at U.S. ports fell for the past 17 weeks and are down more than 20 per cent from a peak last year. March futures climbed as much as 3.1 per cent to US$2,598 a pound, the highest for a most-active contract since Nov.1.

The contract breached its 100-day moving average, a bullish technical signal. "With more signs of lower West African production this season, cocoa can regain upside momentum," Chicago-based Hightower Report said in a note.

In other soft commodities, raw sugar, arabica coffee and cotton also advanced amid a broad rally across most raw materials, supported by a weaker dollar.