Slumping Cocoa Prices May Boost Hershey's Chocolate Earnings

(Bloomberg) -- Slumping cocoa prices may sweeten prospects for Hershey Co.’s chocolate margins, according to Sanford C. Bernstein & Co. analyst Alexia Howard.

Cocoa futures in New York dropped 10 percent this month, touching a seven-week low on Thursday. A decline in the chocolate ingredient may help counter the rising costs of freight, packaging and wages this year, Howard said in a note.

West African weather conditions have been mostly favorable, signaling ample harvests in Ivory Coast, the world’s top cocoa producer, and Ghana, the second-biggest. Hershey is gearing up for Valentine’s Day sales of its chocolate kisses and bars.

“The world cocoa-bean supply appears robust,” Bloomberg Intelligence analyst Diana Gomes said in an email. El Nino winds may hamper the mid-season harvest and soil conditions for the next harvest, but those risks seem to be reflected in current prices, Gomes said.

A spokesman for Hershey did not immediately return a request for comment.

Cocoa for March delivery dropped 0.4 percent to $2,168 a metric ton on ICE Futures U.S. in New York after touching $2,161, the lowest for a most-active contract since Dec. 13.

--With assistance from Shruti Date Singh and Deena Shanker.

To contact the reporter on this story: Jeremy Hill in New York at jhill273@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Patrick McKiernan

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