What drives the price of chocolate

Cacao is priced on the London and New York futures exchanges, and four things move it: harvest volume, disease pressure, weather, and currency movement in producing countries. Grinding figures — the volume of beans processed into mass, butter and powder — are watched as the demand indicator.

Cocoa butter and cocoa powder are priced separately, and the ratio between them determines whether processing beans is profitable at all. When butter is expensive relative to powder, manufacturers substitute where the law allows, which is the mechanism by which a market movement reaches a wrapper.

This is the structural point and it explains most of the volatility. Cacao is a perennial tree crop: a newly planted tree takes three to five years to bear and longer to reach full yield. A price rise cannot call forth supply this season or next.

So shortages persist. Where an annual crop would see planting rise and prices fall within a year, cacao takes half a decade — and by the time the trees bear, the conditions that caused the shortage may have changed again.

Not evenly. Large manufacturers hedge on the futures market and buy forward, so a price spike reaches their products slowly and partially. Craft makers buying named lots at multiples of the commodity price are less exposed to the commodity movement but more exposed to a single farm's harvest.

Farmers are least protected of all, because the farmgate price is set well below the exchange price and does not track it closely upward. That asymmetry is why living income initiatives exist and why they are contested.