Inflation hits chocolate Easter eggs as milk, cocoa and sugar prices spike

Inflationary pressures have triggered a 32 per cent spike in the cost of ingredients that make up chocolate Easter eggs and bunnies.

The cost of core ingredients for chocolate has jumped by 32 per cent since the start of the year. ​

It’s not just mortgage rates, clothing, food and the general cost of living that is on the march, with consumers advised to brace for price increases for their chocolate Easter eggs and bunnies.

The Firetrail Chocolate Index, prepared by funds manager Firetrail Investments, has revealed a 32 per cent leap since the start of January in the cost of the core ingredients that are used to make chocolate eggs and bunnies, led by commodities such as milk and cocoa.

The performance of key commodities places further pressures on the profit margins of chocolate manufacturers as well as the retailers that sell their products, like supermarkets.

Anthony Doyle, head of investment strategy, Firetrail Investments S3 Global Opportunities Fund, said food inflation was creeping into the chocolate market as well to match the price hikes seen in other categories such as meat, seafood and packaged groceries.

“With all the talk about rising commodity prices and food inflation, spare a thought for the Easter bunny this year,” Mr Doyle said.

“Class IV milk, which is used to produce butter and milk powder, has risen by 67 per cent to around $US25 per hundredweight. Class IV milk prices are now at record highs. Raw sugar has risen from $US15.75 to $US20.31 per pound, while the price of cocoa has risen from $US2,472 per metric ton to $US2,667.”

He said prices of milk, raw sugar and cocoa — like many other commodities — have ratcheted higher following pullback of supply after pandemic lockdowns in 2020. With economies reopening, demand has shifted higher for many commodities, resulting in higher prices.

Easter is shaping up as a crucial period for retailers following two years of Covid-19 lockdowns and restrictions on movement. Industry experts predict almost $9bn could be spent over the Easter holiday, with food retailers forecast to rake in as much as $1.5bn in chocolate Easter eggs, bunnies and hot cross buns.

The nation’s second biggest supermarket chain, Coles, is expecting to sell more than 15 million chocolate Easter eggs and eight million Easter bunnies this Easter, as a survey conducted by the retailer showed that almost 80 per cent of families are planning to buy eggs and bunnies as presents this holiday.

Mr Doyle said the “demand destruction” caused by the pandemic as people stayed at home and spent less saw many farmers and agricultural businesses slash their production levels or allow their herds to shrink, which has now led to a lack of supply as demand has rebounded — pushing up prices.

“A lot of the producers of agricultural items, they might have reduced their herds, or they might have planted less crops with that uncertainty. And the thing about commodity markets, whether it‘s agricultural, hard or soft commodities, is that if the price is high enough, supply will respond and supply will eventually respond.

“And I think that‘s what you will see and in particular the milk prices that are on the Firetrail Chocolate Index, the Class IV milk are specifically for butter and powdered milk, reflects a cyclic downsizing of the American herd that occurred after Covid-19 and we are now hearing that herd numbers are building up again.”

Originally published as Inflation hits chocolate Easter eggs as milk, cocoa and sugar prices spike