High cocoa prices make for expensive Valentine's Day chocolates

Cocoa prices have surged over the past several years, recently reaching record levels and driving up the cost of chocolate. Scott Olson/Getty hide caption

Bonbons and truffles are even more of a luxury this Valentine's Day.

For the third year, cocoa harvests are coming up short due to abnormal weather, which has led to cocoa beans being so expensive that chocolate makers have little choice but to raise their own prices.

"It's been a pretty dramatic change to our business model," says Alex Whitmore, who runs Taza Chocolate, a Boston-area manufacturer.

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His company makes mainly bars, but also Mexican-style chocolate, chocolate-covered nuts and bark. Taza's focus on darker, cocoa-dense chocolate means Whitmore has been paying a premium for cocoa beans.

"The cost of cocoa for us has almost tripled," he says. "We did raise prices by almost 15% … and it's a possibility that we may have to increase again, but we're doing everything we can to kind of hold the line."

Big chocolate brands such as Nestle, Hershey and Mondelēz, which makes Cadbury and Milka, have all raised prices, too, and warn of further increases over this year.

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The world's supply of cocoa is having the worst shortage in 60 years, says David Branch, an agricultural industry analyst at Wells Fargo.

That's because most of the world's cocoa comes from West Africa, particularly Ivory Coast and Ghana. Changing climate patterns have farmers there dealing with extreme weather and sick trees.

"Too much moisture followed by getting too hot and drying out too much," Branch says, explaining that shifting weather patterns stress older cocoa trees and make them more susceptible to disease.

Globally, the latest crop data showed production down 13% from a year earlier, Branch says, marking the third year of declines.

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"We're seeing improvement in deliveries," he says. "But it's a pretty big hole to climb out of."

Last Valentine's Day, the price of cocoa on the futures market broke a 47-year record. It has doubled since then.

The financial rollercoaster has drawn many speculators trying to make a quick buck on big price jumps, which has only exacerbated the volatility.

Shoppers, so far, don't seem too disheartened. Chocolate sales are still rising, despite higher prices.

"Consumers quote chocolate as one of their indulgences that they cannot live without," Mondelēz CEO Dirk Van de Put told investors last week.

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And the good news is that the market is correcting itself — just slowly.