Thursday, June 19, 2008
Cocoa Surges While Mexico Controls Food Prices
Get ready for your chocolate fix to be a little more dear. Cocoa prices have hit a 28-year high. According to a story in the Financial Times, the reason is concern "over the size and quality of this year’s crop from Ivory Coast, the world’s largest producer." This basic component of chocolate has climbed 52.3 percent this year alone:
In the meantime, in another Financial Times story, food prices are hitting hard enough in Mexico that the "center-right goverment" - which I take to mean on the conservative side - has put price controls into place on 150 basic items, including beans, cooking oil, canned tuna, and fruit juice. Prices will remain frozen from now until the end of the year. But given the hefty jumps we've been seeing in the underlying goods, what happens to the merchants and wholesellers? I understand that people with no money are hurting, but this seems to be a short-sighted approach of addressing a problem. The government shifts the burden onto businesses, which might end up losing money in the long run and possible start cutting jobs, because it wants to appear as though it's active toward the problem. But the dynamics don't change, and the effect is to sweep the pain under a carpet and out of site. The eventual price for this approach may be higher and longer-lasting, but, hey, maybe that will be for someone else to deal with.
The International Cocoa Organisation is forecasting a small supply surplus of 71,000 tonnes in 2008/09, but a poor crop in Ivory Coast could push the market into a supply deficit for a third year in a row.Similarly, Brazil has reported that its sugal crop will be delayed and smaller because of rain, so sugar prices rose by 3.2 percent. Now here's the real interesting part, I think: prices for October sugar are 12.83 cents a pound. How much do you pay for a pound of sugar? Who gets the rest of that money, and what value do they add to justify their cuts?
In the meantime, in another Financial Times story, food prices are hitting hard enough in Mexico that the "center-right goverment" - which I take to mean on the conservative side - has put price controls into place on 150 basic items, including beans, cooking oil, canned tuna, and fruit juice. Prices will remain frozen from now until the end of the year. But given the hefty jumps we've been seeing in the underlying goods, what happens to the merchants and wholesellers? I understand that people with no money are hurting, but this seems to be a short-sighted approach of addressing a problem. The government shifts the burden onto businesses, which might end up losing money in the long run and possible start cutting jobs, because it wants to appear as though it's active toward the problem. But the dynamics don't change, and the effect is to sweep the pain under a carpet and out of site. The eventual price for this approach may be higher and longer-lasting, but, hey, maybe that will be for someone else to deal with.
Labels: chocolate, government, news, prices, sugar
