In fairness, it was probably worth it. But that triple-sized Creme Egg you opened on Sunday morning, with the Smarties on the side, will have cost more than ever.
Last week, the price of cocoa beans punched its way through $10,000 (£7,925) a tonne. It is up by 130pc so far this year, and has quadrupled over the last two years. Forget artificial intelligence, chocolate is the market you really need to be in.
Sure, from droughts to EU rules, there are reasons why the price has gone up. And yet, it is also a warning that asset markets are getting very frothy again. In reality, we are in the middle of a new bubble – and the soaring price of chocolate is the first clear signal that it is starting to run out of control.
With inflation still running at a high level, it probably came as no surprise to anyone that their haul of Easter eggs was more expensive this year than last. According to the retail experts Reapp, the average price of a supermarket egg has risen from £2.27 to £2.55 over the last 12 months, while the consumer magazine Which found that some premium lines were up by more than 60pc.
On social media, there is a trend for giving “statement eggs”, such as the £60 luxury confection made by the Italian manufacturer La Perla di Torino. Buying an egg for every member of the family is more expensive than it has ever been.
It is not hard to work out why. The cost of cocoa beans has been running out of control. It has doubled so far this year, and quadrupled over the last two years. At the rate the price is going up, you may soon be hanging onto any unwanted eggs as an investment.
For a comparison, Nvidia, the manufacturer of the chips that power AI systems, which has been the hottest stock market theme of the year so far, is up by 95pc since January. If you really want to make some money, chocolate has been the place to be.
True, there are some genuine reasons for the escalation in prices. Bad weather and disease in West Africa, the main growing region for cocoa beans, have reduced supply; poor estate management has led to lower crop yields, while a currency crisis in Ghana means farmers have not had the cash to buy pesticides; and complex new EU rules designed to ban beans from areas of deforestation have snarled up established supply chains.
Add all that up, and there are fewer beans for sale despite growing demand. And yet, a quadrupling of the price has nothing to do with the fundamentals of supply and demand. It has become a classic speculative short squeeze, with traders piling into a frothy market to make a killing. The volume of contracts in cocoa futures has soared as chocolate becomes the latest hot asset to trade in the markets.
There is a wider lesson in that. Sure, commodity prices spiral out of control from time to time. In 2022, the price of nickel futures soared to over $100,000 a tonne before falling back to normal levels again. Once an asset starts to soar in price, lots of investors will jump on the bandwagon hoping to make a quick fortune. And yet, this is also a signal of something far more worrying. A classic bubble has already started.
There are signs of that everywhere. With the unfortunate exception of the UK’s FTSE 100, which no longer seems capable of joining any form of bull market, equity prices are soaring all over the world. Shares gained more in the first quarter of 2024 than they have since 2019, with the MSCI index of worldwide stocks gaining 7.7pc in the year so far.
The price of Bitcoin, which has established itself in the 15 years it has been around as a sure indicator of over-exuberance in the financial markets, has climbed back over $70,000 a unit, more than doubling over the last year. The gold price, after a decade in the doldrums, is hitting all-time highs
Individual stocks are even crazier. The website forum Reddit soared on its IPO in New York, even though it does not have much in the way of profits or even revenues. The frenzy to own shares in Donald Trump’s Truth Social, following its reverse takeover by a special purpose acquisition company in the US last week, was an even surer sign that many investors have lost all contact with reality.
Over the course of a couple of days of frantic trading, the former President made an estimated $6bn on paper, even though the social media site he set up when he was banned from X, formerly known as Twitter, has hardly any users, and virtually no genuine revenues.
Over the last two years, the world’s major central banks defined their mission as bringing inflation back under control, and taking the froth out of the markets. Interest rates have returned to levels not seen since before the crash of 2008 and 2009 and they have stopped printing money on vast scales, and, with quantitative tightening as it is known, have actually started taking liquidity out of the system again.
And yet, if anyone thought that tighter monetary policy would kill off the endless series of speculative bubbles, however, they can forget about it. It simply isn’t happening.
Instead, there is still far too much cash swilling around the financial system, driving up the price of one commodity or another to dangerously unstable levels. In reality, policy-makers still haven’t brought the markets back under control – and the soaring price of your Easter egg is all the proof you need of that.
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