My neighbor Ed was at it again. He’s not much of a thinker in normal times but the increase in chocolate Easter bunny prices drove him a little nuttier than usual. I saw him at the town mini mart and tried to avoid him but it is a small store and there is not much room to hide. The last time we spoke, he was ranting about inflation and the rotten politicians who were causing it. I tried to explain supply chain disruptions as well as government policies that did, indeed, contribute to inflation but had benefits that most voters would approve. He, of course, was having none of it. Now there was a new plot to raise the price of chocolate to ruin Easter and he had me in his line of sight.
As I may have mentioned earlier, economic illiteracy drives me nuts and I have little patience with it but he is a neighbor and my wife says it’s important to keep peace in the neighborhood. (Not sure why!) So I tried to explain the causes and effects of the increase in chocolate Easter bunny prices.
Ed, here are some facts…not opinions, not plots, just facts.
You’re right that the price of chocolate has gone up. It increased by 11.6% in 2023, much more than the overall rate of inflation of 3.4%.
Chocolate is made from cacao (pronounced ka kow with emphasis on the kow) pods.
53% of the world’s cacao pods come from West Africa (Ghana and Ivory Coast).
Cacao producers have experienced unusual rain and drought. The unusual weather conditions have led to an increase in black pod disease and swollen-shoot virus (who knew?) which are rotting pods and killing trees.
Illegal gold miners are tearing up trees to search for gold.
Small cacao farmers have no funds to invest in pesticides and other disease prevention strategies.
Many cacao trees have outlived their usefulness; they no longer bear fruit.
While there are other factors leading to the increase in prices, these are the main ones.
It doesn’t take a Ph.D. in Economics to figure out that these conditions decrease supply and put upward pressure on prices. And the bad news is that things are not going to improve for a while. The center of cacao production may move to other parts of the world, but cacao trees take a few years to produce so the price of Ed’s chocolate bunnies and most other chocolate products are likely to continue to rise for the foreseeable future. You can’t repeal the laws of supply and demand.
I asked Ed if he cut back on his purchase of chocolate bunnies for his grandkids and he said he did not. I told him that, if he is representative of all chocolate bunny buyers, that suggests that the price elasticity of demand is very low within the relative range.
Ed, of course, didn’t want to hear about black pod disease or illegal gold mining or supply and demand or price elasticity of demand. He even objected to the pronunciation of cacao. “Cocoa is cocoa’” he insisted. When I asked him to spell it, he left off the “a”.