This morning,?Sofia Horta e Costa wrote:
Surging cocoa prices mean making a KitKat bar is getting a lot more expensive.
That?s prompting traders to load up on bearish options on Nestle SA before the company reports sales this month. With cocoa harvesting season in full swing, concern that the spread of Ebola will disrupt bean shipments helped send prices to the highest since 2011. Bearish contracts on the maker of Baby Ruth bars cost the most relative to bullish ones in more than a year.
Hedge funds have raised bets that cocoa will soar even more after it completed the longest series of monthly gains in 12 years. With prices for ingredients from hazelnuts to milk also rising this year, the rally has already squeezed profitability at Nestle?s chocolate division, said Bank Vontobel AG?s Jean-Philippe Bertschy.
?Nestle?s last set of results raised some concerns about the confectionery division as profitability fell,? Bertschy said in an e-mail. ?The recent price hikes for cocoa bean and cocoa butter have raised some questions as to whether chocolate producers would be able to cope.?
Farmers are struggling to keep up with rising demand for chocolate candy. Ivory Coast, the world?s top cocoa-bean producer, shares borders with Liberia and Guinea, the center of the Ebola outbreak. Ebola has killed more than 3,000 people, the World Health Organization said last week.
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