By ROBERTA C. YAFIE -------------------------------------------------------------------------------- HEART TROUBLE: Soaring sugar prices and cocoa volatility are adding a bitter taste to chocolate gift-giving this Valentine's Day.
February 14, 2006 -- Roses are red, Violets are blue, Chocolate's getting Too expensive for you! That's the tune your sweetheart may be singing as everything from inflation and Hurricane Katrina to civil war in West Africa are sending chocolate prices rising and sales falling this Valentine's Day.
"We're getting annihilated on costs," Tom Ward, president of Kansas City, Mo.-based candymaker Russell Stover, told The Post. "Everything's almost double. Our largest expense now is nuts, because we use so many. Pecans have nearly doubled to $4.60 a pound from $2.75."
More than 35 million heart-shaped boxes will be sold by the end of business today. Add to that the high-end bonbons that make your sweetie's heart beat a little faster, or the 8 billion sugary conversation hearts produced this year that beg, "Be Mine."
Russell Stover Candies makes 50 different kinds of hearts. Its best-seller, the 1-pound foil heart, rings up at $8.99 and accounts for 850,000 units. It sells 1.1 million 8-ounce hearts and 3.2 million 2-ounce picture hearts.
Ward buys chocolate forward through his suppliers, including Callebaut, Wilber and ADM, who hedge their purchases on the New York Board of Trade, he says.
So far, his company has been able to hold the retail price line, but on July 1 prices will rise 12 percent to 25 percent, the first hike in four years.
The best cocoa comes from the Ivory Coast, where this year's crop is expected to be less than forecast, according to Ann Prendergast of Man Financial.
"Chocolate manufacturers have to pay up if futures keep going up," she says, citing the $1,350- to $1,625-per-ton range in the Nybot's May futures contract.
Brazil's diversion of most of its sugar crop to domestic ethanol production is squeezing supplies, too. Hurricane Katrina knocked out two sugar refineries that supply Russell Stover's Texas plant and sent the company to the cash market.
Because of U.S. sugar subsidies that protect domestic producers, prices are 200 percent higher than futures — 24 cents to 28 cents a pound, versus today's Nybot price of 17.5 cents, according to Luis Rangel, vice president of commodities at Fimat.
