Hot Commodities, The Valentine’s Day Edition

Spend Matters welcomes a guest post from Abigail Green, at Mintec.

William Shakespeare once wrote, “If music be the food of love, play on,” linking food and love forever. It’s no surprise then that on Valentine’s Day, edibles such as chocolates, sweets and even wine are traditional gifts. Therefore it’s worth looking at these commodities, along with that old romantic standby of roses, as they are purchased in vast quantities on February 14th—all in the name of love.

Valentine's Day

Valentine’s Day is big business, and every year in the US over 35 million heart-shaped boxes of chocolate are sold, along with 189 million roses.

Roses, the obvious choice for the day of romance, tend to peak in price in February as demand soars for Valentine’s Day. This year is no exception, and rose prices are once again expected to surge. The largest global producer and supplier is Kenya, whose excellent weather and nutrient-rich soil is excellent for rose production. It is estimated that one in three roses sold on Valentine’s Day originates from Kenya, despite increased production and supply from countries like Ecuador and Colombia, who are slowly attaining a greater share of the US market.

Roses generally make the dash from soil to store in less than 60 hours. Once Valentine’s Day has come and gone, demand falls sharply and prices return to lower levels.

Wine is another popular gift that flows well at Valentine’s. Californian wine producers in the second half of 2012 reported good grape harvests both in terms of size and quality. The volume of wine produced was up year-on-year, causing prices to fall back. This rise in production is good news for consumers, but growing demand from emerging markets such as China could lead to prices rising again in the future.

While the US wine supply is expected to meet domestic demand and stave off any immediate domestic price rises, increased international demand is expected to lend support to international prices. US prices for imported wine in 2013 are therefore expected to strengthen on 2012 levels. Supply from South Africa and Chile is strong but the healthy global demand is preventing price falls.

Cocoa, the main ingredient in our final Valentine’s Day favourite of chocolate, saw some movement in price throughout 2012 but ended the year at the amount the same level it started. The majority of cocoa consumed in the US originates from South America, while Europe tends to import from Africa. Cocoa from both markets is down from the peaks seen in 2011.

For now, cocoa supply is matching a weakened level of demand. However, a supply deficit is expected for the current 2012/13 season. A projected fall in production from major producing countries combined with a need to build stocks in the confectionary sector is likely to lead to a deficit, but it is not known how big this will be until initial production forecasts for the 2012/13 are made in early March.

This means that while buying roses on Valentine’s Day will likely always be expensive, for now those on a tight budget can find some comfort in wine and chocolate.

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