Adventures in Supply and Demand: The Great Chocolate Shortage of 2020

I have recently noted a large number of reports claiming that the world is headed for a chocolate shortage. According to industry insiders, the potential for a shortage exists as a demand issue; as more people become able to afford chocolate around the world, and as more people are developing sweet tooths, more chocolate needs to be in the market to satisfy cravings. Estimates are that if demand increases at the same rate over the next few years as it has over the past few, it will outstrip supply by 2020.

However, in addition to increasing demand, there are also fears on the supply side. Not only are there concerns about supply failing to keep up with demand, there are additionally fears that supply could actually decrease soon. Factors contributing to these concerns are the limited number of places (with varying levels of political and social stability) where the cocoa tree can be grown, fungi and parasites and even climate change. All these factors and others are contributing to an increasing fears of a supply shock which could further foil efforts to keep up with demand.

Luckily, two of the benefits of modern science may be able to help out. First off, as the Scientific American article linked-to above notes, the production of cocoa is very inefficient at the present; yields may only be 33% of their potential. Proper use of chemical insecticides and fungicides could increase that number dramatically. The other area of science which could help is genetic engineering. Apparently, unlike, say corn, which has thousands of different strains, there are only 10 varieties of cocoa plants, all of which are in the same species. This of course makes populations vulnerable to disease, an issue a collaboration between industry and the Department of Agriculture is trying to address through genome mapping and subsequently, breeding programs.

Aside from a personal stake in this issue as a hopeless chocolate lover, it is also an issue which fits nicely into this site's area of expertise. Though science will help to solve this problem, it is also one that can be uniquely discussed using economics. Demand is on the rise. A supply shock is a real possibility due to disease. On a mixed macro/micro level, it is a huge export crop and creator of jobs in many equatorial nations. The increase in demand points to the rise of middle classes in developing nations across the world. You could almost build a first year economics course load just around the cocoa plant.

Here's hoping the scientists can figure it out. I am guessing that with the amount of money at stake, research will be moving ahead at breakneck speed and will ensure that the Great Chocolate Shortage of 2020 will always be more of a headline than an actual problem. That said, if any of our readers know how long a Hershey bar will keep in the freezer, I would appreciate a note in the comments section...


  1. First fuel prices, and now this. God save us all.

    In all seriousness, given the push toward whole/organic foods, will the markets support a more "efficient" cultivation of cocoa using chemicals? Or will it make any difference at all for a commodity that's targeted as one in need of fair trade regulation and, in some countries, is captured to finance civil war?

  2. Thanks for stopping by the site, I appreciate the questions.

    While I am not sure how well equipped I am to cover topics ranging from fair trade to civil wars in Africa (clearly you could base a whole college experience on chocolate, nevermind just the year of economics classes I jokingly suggested in the article) I do have a few thoughts on this.

    I think that there is a market for both the chemically cultivated mass production chocolate and the fair trade/organic stuff. We have seen this in other markets with coffee serving as a very good example. They are not mutually exclusive, and indeed the one market can often benefit the other.

    For example, people who are driven more by price than geopolitical/socioeconomic issues will continue to buy Hershey bars and Kisses. That kind of mass-produced chocolate is the biggest segment of the market, and is the one which is most impacted by the middle-class-driven demand spike Big Chocolate insiders are keeping an eye on.

    For those with the both the big conscience and the pocketbook to match, fair trade, organic chocolate can continue to be an option. These folks are not so price sensitive, so when a shock happens, they are not so impacted by rising prices. When they get a craving, they will satisfy it.

    The big conscience people without pocketbooks to match will have to make some tougher choices. They will likely be the most price sensitive. They will probably buy the good stuff when the price is on the low side, and will either forego the treat or put qualms aside and get the cheap stuff when prices are high. Also in this category might be people who just enjoy the taste of better chocolate, but will buy mass-market items when prices so require.

    In any case, the more chocolate that is on the market, the better prices will be across the board. Now, I am not sure if any of the varieties of cocoa are more attractive than others for the higher quality products, or if it is the processing that allows the better quality treats to stand out.

    Even if it is the former, there will be cases (noted above) where higher prices for good chocolate will cause people to buy less of it and more low quality chocolate. This will decrease demand and bring prices back down for the good stuff. We are diving lightly into the economic concepts of elasticity and substitute goods there.

    If it is the latter, then more production should lower prices across the board to some extent, with a premium of course being place on chocolate produced by more organic means. Even organic costs, and premium, should come down however, if everyone is making more money. Better infrastructure will be built, external costs will come down, and the market should be able to become more efficient. You might think that is a stretch, but in the article it was noted that 15% of one country's (Ivory Coast maybe) GDP was cocoa-driven, and that there was bad infrastructure there...a few roads decreasing loss and increasing access to farmable land could go a long way in a place like that.

    As for the funding of civil war, I am not sure I have the answers there...maybe increased income from improved yields will make citizens less tolerant of warlords behaving badly? Not sure, but it is a nice thought...