Chocolate candy makers are feeling the squeeze as the cost of a key ingredient rises.
A report from a Citigroup (C) analyst, issued on Thursday, predicts that cocoa supplies will fall short of demand during the coming season by 135,000 metric tones. That will mark the second consecutive year in which demand has exceeded supply, Bloomberg notes.
The forecast helped send cocoa futures higher on world markets. Citigroup expects cocoa to sell for between $2,500 and $2,800 a ton over the next twelve months.
On Thursday, cocoa futures for December delivery climbed almost 1%, hitting $2,620 a ton. Rising costs for cocoa beans is fueling spikes in the cost of cocoa butter, a major ingredient in chocolate. The butter ratio — the cost of cocoa butter relative to cocoa bean prices — hit 2.73 times London futures earlier this month, a level not seens since since November 2008.
The price hikes come as cocoa consumption in North American and Asia grows.
Shares of major chocolate producers Hershey (HSY) and Mondelez International (MDLZ) fell modestly in Friday trading.