Soaring cocoa prices as supply fails to keep pace with demand

Sunday, October 25, 2009
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There is an excellent article in the Times today about the surge in the world price of cocoa. Cocoa prices have hit a 30-year high as poor weather threatens to drive the price of chocolate up again for Western consumers. Cocoa has reached $3,412 a tonne in New York as concerns deepened about demand outstripping supply for the first time since 1968. This is a really good article to use to consolidate students’ understanding of how shifts in supply and demand can lead to price volatility. And also the importance of price elasticity of demand and supply in shaping price changes.

“The surge in price also indicates that cocoa is increasingly being used for financial investment rather than merely sold to industry”

* What factors are limiting cocoa supply?
* Why is demand from western economies rising - even though many are still in recession?
* Will cocoa farmersd necessarily gain from higher world prices?

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