WEBVTT - Daybreak Weekend: U.S Inflation Data, Europe Chocolate Prices, BYD Preview 0:00:02.960 --> 0:00:11.760 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg day 0:00:11.760 --> 0:00:14.120 Break Weekend, our global look at the top stories in 0:00:14.160 --> 0:00:16.920 the coming week from our Daybreak anchors all around the world. 0:00:17.120 --> 0:00:20.919 Straight ahead on the program, data on inflation and economic 0:00:20.960 --> 0:00:23.200 growth this week, and we take a look at the 0:00:23.320 --> 0:00:27.480 US cruise industry earnings from the world's biggest cruise operator. 0:00:27.800 --> 0:00:29.200 I'm Tom Busby in New York. 0:00:29.240 --> 0:00:31.440 I'm kunin Hepger here in London, where we're looking at 0:00:31.480 --> 0:00:34.519 the chocolate industry faced with sour in coco prices. 0:00:34.720 --> 0:00:36.920 I'm Brian Curnis in Hong Kong. I'll take a look 0:00:36.960 --> 0:00:41.360 at the upcoming results from YD the business, the expansion plans, 0:00:41.520 --> 0:00:43.480 and of course the geopolitics. 0:00:43.960 --> 0:00:47.960 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:48.000 --> 0:00:50.479 E Loove Them three own New York, Bloomberg ninety nine 0:00:50.520 --> 0:00:53.920 to one, Washington, DC, Bloomberg one O six one, Boston, 0:00:53.960 --> 0:00:58.800 Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 0:00:58.920 --> 0:01:02.160 XM one nineteen and around the world on Bloomberg Radio 0:01:02.240 --> 0:01:04.560 dot com and via the Bloomberg Business App. 0:01:08.400 --> 0:01:10.600 Good day to you. I'm Tom Busby, and we begin 0:01:10.680 --> 0:01:13.560 today's program with the third and final reads out this 0:01:13.640 --> 0:01:18.080 week on US economic growth and inflation, the core personal 0:01:18.120 --> 0:01:21.759 consumption expenditures for the final quarter of twenty twenty three, 0:01:22.160 --> 0:01:24.600 and we'll talk about what that means for the FED. 0:01:24.760 --> 0:01:29.160 For more, we welcome Annawong, chief US economist for Bloomberg Economics. Anna, 0:01:29.240 --> 0:01:30.160 thank you for being here. 0:01:30.360 --> 0:01:31.320 Hi, good to be here. 0:01:31.520 --> 0:01:33.720 Well, before we talk about what you expect to see 0:01:33.760 --> 0:01:36.920 from Q four GDP and Q four PCE, let's begin 0:01:37.319 --> 0:01:39.959 with your reaction to what the Central Bank did this 0:01:40.040 --> 0:01:43.399 past week, holding rates unchanged, that's the fifth meeting in 0:01:43.400 --> 0:01:47.800 a row, while maintaining the outlook for three rate cuts 0:01:47.880 --> 0:01:49.120 this year. What do you make of that? 0:01:49.800 --> 0:01:53.560 Well, that met our expectation because we thought that Powell 0:01:53.640 --> 0:01:57.040 himself is the medium voter, and as long as Powell 0:01:57.120 --> 0:01:59.520 is of the view that three rate cuts is still 0:01:59.520 --> 0:02:02.559 appropriate for this year, I think he will carry most 0:02:02.600 --> 0:02:07.360 of the FED board members with him. I thought more significantly, though, 0:02:07.560 --> 0:02:11.240 is that they revised up their view of what FED 0:02:11.440 --> 0:02:15.320 funds rate should be beyond twenty twenty four. And basically 0:02:15.360 --> 0:02:18.640 the message there is that they believe that the underlying 0:02:19.919 --> 0:02:25.200 neutral rates in the economy, for you know, for the layman. 0:02:25.280 --> 0:02:28.160 What that means is it's the interest rate that should 0:02:28.160 --> 0:02:31.639 prevail in the long term consistent with two percent inflation. 0:02:32.000 --> 0:02:35.040 The SEP shows that the Committee believes the neutral rate 0:02:35.120 --> 0:02:37.880 has risen and a lot of the dots in the 0:02:37.919 --> 0:02:42.440 dot flot have moved up to about three percent for 0:02:44.360 --> 0:02:47.120 the neutral rate. So I think that's significant because it 0:02:47.200 --> 0:02:50.359 means that in the next year or two we would 0:02:50.400 --> 0:02:52.280 see less rate cuts on the whole. 0:02:52.680 --> 0:02:56.680 So, despite some disappointment about a recent rise in inflation, overall, 0:02:56.680 --> 0:02:59.800 this looks like a pretty upbeat outlook for economic growth, 0:03:00.160 --> 0:03:01.799 labor market, and inflation. 0:03:02.240 --> 0:03:05.240 Yeah, I mean, I think that the Fed still believes 0:03:05.360 --> 0:03:09.440 mostly that inflation could return to two percent without generating 0:03:09.480 --> 0:03:13.760 a lot of losses. On the employment side, they revised 0:03:13.840 --> 0:03:17.639 down the unemployment forecast for this year from four point 0:03:17.760 --> 0:03:21.840 one percent last December to four point zero percent, and 0:03:22.040 --> 0:03:24.959 unemployment rate is already at three point nine percent. I 0:03:25.040 --> 0:03:28.760 think they basically see just a very minor deterioration in 0:03:28.800 --> 0:03:31.079 the stabilizing on that level. 0:03:31.480 --> 0:03:34.040 Meanwhile, we heard from FED Chair J Powell last week 0:03:34.080 --> 0:03:37.360 after Federal Reserve policymakers stuck to their path of interest 0:03:37.440 --> 0:03:40.040 rate cuts at least for now, after hitting a bump 0:03:40.040 --> 0:03:42.080 on the road to low and steady inflation. 0:03:42.280 --> 0:03:44.560 We believe that our policy rate is likely at its 0:03:44.600 --> 0:03:48.000 peak for this tightening cycle, and that if the economy 0:03:48.000 --> 0:03:51.600 evolves broadly as expected, it will likely be appropriate to 0:03:51.680 --> 0:03:55.520 begin dialing back policy restraint at some point this year. 0:03:56.640 --> 0:03:59.840 The economic outlook is uncertain, however, and we remain highly 0:04:00.080 --> 0:04:01.640 ten of two inflation risks. 0:04:02.000 --> 0:04:05.800 However, Bloomberg opinion columnst Mohammad l Arian said the Fed 0:04:05.840 --> 0:04:08.360 should push out their rate cut timeline. 0:04:08.480 --> 0:04:11.440 We're living in a world where the supply side isn't 0:04:11.480 --> 0:04:14.560 flexible enough, and you get almost every week you get 0:04:14.600 --> 0:04:18.240 indication of changing supply chains, you get indication of the 0:04:18.279 --> 0:04:20.640 label of the tightness of the labor market, you get 0:04:20.680 --> 0:04:23.120 indication of an energy transition that's not going as well 0:04:23.120 --> 0:04:25.840 as people want it. All these things mean the supply 0:04:26.000 --> 0:04:30.120 side is less flexible, and the underlying inflation rate that 0:04:30.240 --> 0:04:33.479 is consistent with the economic well being for now is 0:04:33.520 --> 0:04:35.120 somewhat higher than two percent. 0:04:34.960 --> 0:04:37.400 And former New York Fed President Bill Dudley says the 0:04:37.440 --> 0:04:40.040 Fed is sticking to its two percent target. 0:04:40.240 --> 0:04:42.880 We still think minetary policy is tight. We still think 0:04:42.920 --> 0:04:45.200 we're going to get more confident about getting inflation down 0:04:45.240 --> 0:04:47.200 to two percent, and so we still think we're going 0:04:47.200 --> 0:04:49.160 to cut rates this year time. He's uncertain, and he 0:04:49.480 --> 0:04:51.560 said over and over again, it depends on the data. 0:04:51.640 --> 0:04:54.960 Well, the Fed always says it is all data dependent. 0:04:55.240 --> 0:04:57.200 And right now, let's get back to the data we're 0:04:57.200 --> 0:05:00.400 going to see this week on fourth quarter GDP final 0:05:00.440 --> 0:05:04.200 read and also PCE. What are you expecting to see? 0:05:04.279 --> 0:05:06.080 Is this going to be good news? 0:05:06.320 --> 0:05:10.200 Well, first of all, Tom, the GDP revisions does not 0:05:10.480 --> 0:05:14.800 just end on the third revision. They go on for 0:05:14.960 --> 0:05:18.680 years and years and years until it could be revised 0:05:18.680 --> 0:05:23.920 even five years. But for the third revision, which we 0:05:24.360 --> 0:05:27.480 are going to get next week, we're expecting the fourth 0:05:27.560 --> 0:05:31.119 quarter GDP to be little a little change at about 0:05:31.120 --> 0:05:34.920 three percent. But more interestingly is that they are going 0:05:34.960 --> 0:05:40.599 to be releasing the information the quarterly change for gd I. 0:05:41.360 --> 0:05:45.360 And in the past two years, gd I has been 0:05:45.480 --> 0:05:50.240 running lower than GDP growth, even though theoretically they are 0:05:50.279 --> 0:05:53.480 measuring the same things. So on a year over year basis, 0:05:54.279 --> 0:05:58.440 gross domestic income actually was running negative as of the 0:05:58.480 --> 0:06:02.360 fourth quarter of last year in contrast to the pretty 0:06:03.080 --> 0:06:06.440 robust increase in GDP growth. So I think we would 0:06:06.440 --> 0:06:09.080 be paying a lot of attention to that because from 0:06:09.279 --> 0:06:14.400 the perspective of the economists too, would be deciding on 0:06:14.480 --> 0:06:18.360 the NBER Business Cycle Dating Committee on whether there is 0:06:18.400 --> 0:06:21.760 a recession. It actually is the average of GDP and 0:06:21.839 --> 0:06:23.120 GDI that matters. 0:06:23.520 --> 0:06:23.640 Now. 0:06:23.680 --> 0:06:26.880 The FED has six more policy meetings this year, the 0:06:26.920 --> 0:06:29.800 next one and April thirtieth may first. Based on what 0:06:29.880 --> 0:06:33.240 we know now, and we won't know this latest figures 0:06:33.080 --> 0:06:36.080 for a few more days. Is it still too soon 0:06:36.160 --> 0:06:38.080 to expect one of those three rate cuts? I mean, 0:06:38.160 --> 0:06:40.120 is June meeting a lot more likely for that? 0:06:40.600 --> 0:06:43.200 Yeah, June is our baseline, and I think June is 0:06:43.200 --> 0:06:45.920 the baseline for the market as well. So I think 0:06:45.960 --> 0:06:49.279 the crucial assumption of that is, as you said, if 0:06:49.360 --> 0:06:54.960 things evolve as we see now, So if unemployment rate 0:06:55.560 --> 0:06:58.880 barely rises, you know, stay in the three point nine 0:06:59.080 --> 0:07:04.760 to four point zero zero range. If core PCE inflation 0:07:05.120 --> 0:07:10.760 comes in, you know, at zero point two to zero 0:07:10.840 --> 0:07:14.320 point three percent per month in the next couple of months, 0:07:14.400 --> 0:07:16.240 I think we will get a June rate cut. 0:07:16.880 --> 0:07:17.200 Wow. 0:07:17.320 --> 0:07:19.240 Well, a lot to look forward to. Well, our thanks 0:07:19.280 --> 0:07:24.000 to Anawong, Chief US economist for Bloomberg Economics, We now 0:07:24.040 --> 0:07:26.520 turn to the state of the cruising industry and the 0:07:26.600 --> 0:07:29.080 latest earnings out this week from the biggest of them all, 0:07:29.200 --> 0:07:32.000 Carnival Cruise Lines. And for more we welcome Brian Egger, 0:07:32.280 --> 0:07:36.880 Bloomberg Intelligence Senior Gaming and Lodging Analyst. Now, Brian, let's start. 0:07:36.920 --> 0:07:39.480 There has been a stunning turnaround in the cruise market 0:07:39.480 --> 0:07:42.000 from the depths of the pandemic just a few years ago. 0:07:42.520 --> 0:07:44.440 How remarkable has this turnaround been. 0:07:44.760 --> 0:07:47.720 It's pretty remarkable. So the industry was basically in a 0:07:47.760 --> 0:07:51.760 state of suspension from an operating perspective from during twenty 0:07:51.800 --> 0:07:54.440 twenty and twenty twenty one. Now we are back to 0:07:54.560 --> 0:07:58.640 essentially pre pandemic levels of both deployment and acmancy. So 0:07:58.640 --> 0:08:02.000 we've kind of seen a full turnaround. And the revenue yields, 0:08:02.000 --> 0:08:05.760 which are the key metric for Carnival, last year, they 0:08:05.760 --> 0:08:08.240 were slightly above what they were in twenty nineteen, so 0:08:08.240 --> 0:08:09.400 we're kind of gone full circle. 0:08:09.640 --> 0:08:11.920 And what are the driving forces for this demand? I mean, 0:08:12.280 --> 0:08:16.080 is the cruise industry? Is it pricing, is it just marketing? 0:08:16.240 --> 0:08:18.560 Is it the people just have got to get out 0:08:18.600 --> 0:08:19.200 on those ships. 0:08:19.320 --> 0:08:21.640 Certainly, we left the pandemic with a lot of pent 0:08:21.760 --> 0:08:24.200 up demand. There were some of that revenge travel phenomenon 0:08:24.240 --> 0:08:27.320 going on, but beyond that, you ei, there's still we've 0:08:27.320 --> 0:08:31.120 seen this across the industry's recover which include lodging, a 0:08:31.240 --> 0:08:36.319 strong sustain appetite among North American consumers and global consumers 0:08:36.320 --> 0:08:40.559 for a leisure travel combined with a relatively moderate benign 0:08:40.600 --> 0:08:42.960 pace of supply growth in the industry. And that is 0:08:43.040 --> 0:08:46.079 a recipe for what has been a very nice pace 0:08:46.080 --> 0:08:47.360 of yield growth recovery. 0:08:47.880 --> 0:08:51.360 And how has the industry changed, How have the ships changed, 0:08:51.679 --> 0:08:54.719 the procedures, the safety protocols. 0:08:55.040 --> 0:08:58.880 Safety protocols were big focus during the pandemic. A lot 0:08:58.920 --> 0:09:03.360 of the voice civic restrictions, vaccines, masking, et cetera. Those 0:09:03.400 --> 0:09:05.439 are now kind of in the past. But we're left 0:09:05.480 --> 0:09:08.600 with an industry that's reattuned to some of these protocols. 0:09:08.840 --> 0:09:10.760 And at the same time, you know what's happened to 0:09:10.800 --> 0:09:14.920 companies like Carnival, they also during the pandemic sold less 0:09:14.920 --> 0:09:19.559 efficient ships have also since then introduced new capacity. So 0:09:19.600 --> 0:09:23.520 the industry from a fleet perspective has fairly current stated 0:09:23.520 --> 0:09:28.199 the art capacity and certainly you know, good operating efficiencies, 0:09:28.240 --> 0:09:31.600 cost efficiencies that really originated during. 0:09:31.400 --> 0:09:34.080 The pandemic, and these ships are bigger than they've ever been. 0:09:34.240 --> 0:09:39.040 They keep getting better, yes, more amenities, roller coasters and 0:09:39.320 --> 0:09:44.319 surfing simulations I mean, and yet they're able to pack 0:09:44.520 --> 0:09:46.160 these cruises in right. 0:09:46.240 --> 0:09:48.720 Yeah, so these ships are more efficient from a fuel 0:09:48.720 --> 0:09:52.480 consumption and operating perspective when they run full. But we've 0:09:52.480 --> 0:09:55.800 definitely seen the combination of strong bookings and moderate supply 0:09:55.880 --> 0:09:59.080 growth low single digits for Carnival the next few years 0:09:59.080 --> 0:10:01.600 translate into good book and you do have on the 0:10:01.600 --> 0:10:04.160 cost side, of course, some pressures from cost inflation and 0:10:04.720 --> 0:10:07.800 advertising dry dout costs, So there are some pressures. There's 0:10:07.800 --> 0:10:10.400 always the geopolitical risk, for example, the conflict in the 0:10:10.400 --> 0:10:13.480 Middle East, you know, removing some capacity from the Red 0:10:13.480 --> 0:10:16.800 Sea area, small part of their capacity, but generally speaking 0:10:16.840 --> 0:10:20.760 they are now on a very attractive trajectory. 0:10:20.840 --> 0:10:21.000 Yeah. 0:10:21.040 --> 0:10:23.920 Also Haiti just very recently, Yeah, and they had redirect 0:10:23.960 --> 0:10:27.160 ships away from a popular port there. Well, then let's 0:10:27.160 --> 0:10:29.880 talk about Carnival and what you expect to see this Tuesday. 0:10:30.600 --> 0:10:33.480 Sure, so our overall forecast for this is actually going 0:10:33.520 --> 0:10:36.280 to be for their first fiscal quarter which ended February 0:10:36.320 --> 0:10:39.679 twenty ninth. That they're on a November fiscal year the 0:10:39.679 --> 0:10:43.280 February quarter. You know, we kind of go by the 0:10:43.320 --> 0:10:46.720 consensus thinking as a benchmark, which is for revenue up 0:10:46.720 --> 0:10:50.920 twenty two percent. The components or that are the revenue 0:10:51.040 --> 0:10:55.000 yield metric is up about sixteen seventeen percent based on 0:10:55.040 --> 0:10:57.959 their guidance, and capacities at four percent. So you kind 0:10:57.960 --> 0:11:01.120 of add that together. You've got you've got pricing, you've 0:11:01.160 --> 0:11:05.200 got low twenties kind of revenue growth based on consensus guidance. 0:11:05.679 --> 0:11:07.480 And how does Carnival compare to some of the other 0:11:07.480 --> 0:11:10.600 big players. There's Norwegian, Royal Caribbean, Disney of course. 0:11:10.720 --> 0:11:12.800 Yeah, so I mean the way I kind of think 0:11:12.840 --> 0:11:14.840 about how they compared to the rivals is when you 0:11:14.880 --> 0:11:18.280 look at twenty twenty four overall, how does their revenue 0:11:18.320 --> 0:11:21.000 yield growth expectation compared to those And you know, and 0:11:21.040 --> 0:11:25.480 what we've seen right now is preliminarily Carnival expecting eight 0:11:25.520 --> 0:11:28.680 and a half percent yuel growth. You know, that's pretty 0:11:28.679 --> 0:11:31.440 similar to like Royal Caribbean actually just raise their guidance 0:11:31.880 --> 0:11:34.240 for reals after they report of the quarter. So now 0:11:34.240 --> 0:11:37.320 it's seven and a quarter percent roughly a midpoint. So 0:11:37.320 --> 0:11:40.600 they're all kind of they're similarly looking for that mid 0:11:40.640 --> 0:11:44.360 to high single digit rate of revenue yield improvement on 0:11:44.480 --> 0:11:47.240 top of twenty three, which is a year where we 0:11:47.720 --> 0:11:51.680 basically reverted back to pre pandemic levels of revenue yield. 0:11:51.800 --> 0:11:54.200 So it's growth on top of that, which is which 0:11:54.240 --> 0:11:54.880 is very healthy. 0:11:55.520 --> 0:11:58.800 And for Carnival now we have we're in Q two right, 0:11:58.840 --> 0:12:02.360 spring has sprung. Everyone's planning their trips for either spring 0:12:02.360 --> 0:12:04.960 break or of course is this the time that they're 0:12:05.000 --> 0:12:06.200 going to see their big bookings. 0:12:06.240 --> 0:12:08.240 So the key part of the booking season, it's called 0:12:08.240 --> 0:12:10.880 the wave season and the cruise industry both as a 0:12:10.880 --> 0:12:13.840 pun on oceanic pun, but also because that's like the 0:12:13.880 --> 0:12:16.640 crest wave in bookings we see that typically happens between 0:12:16.800 --> 0:12:20.360 years and kind of like January February, all indications from 0:12:20.440 --> 0:12:23.640 other companies as well as that booking season has been robust. 0:12:24.000 --> 0:12:27.280 Wow well Carnival Cruise Lines reporting this Tuesday and our 0:12:27.320 --> 0:12:30.480 thanks to Brian Egger, Senior Gaming and Lodging analysts at 0:12:30.520 --> 0:12:33.960 Bloomberg Intelligence and coming up on Bloomberg day Break weekend, 0:12:34.000 --> 0:12:37.440 the challenges for Europe's chocolate industry just ahead of the 0:12:37.440 --> 0:12:51.439 Easter holiday. I'm Tom Busby, and this is Bloomberg. This 0:12:51.480 --> 0:12:53.920 is Bloomberg day Break weekend, our global look ahead at 0:12:53.920 --> 0:12:56.520 the top stories for investors in the coming week. I'm 0:12:56.600 --> 0:12:59.640 Tom Busby in New York. Up later in our program, 0:12:59.679 --> 0:13:02.439 earning this week from some of China's biggest banks and 0:13:02.520 --> 0:13:05.880 that nation's biggest ev maker. But first, it's one of 0:13:05.880 --> 0:13:08.760 the biggest events of the year in the chocolate industry. 0:13:09.120 --> 0:13:12.520 Easter means big business in the UK alone, Consumers will 0:13:12.559 --> 0:13:15.800 spend as much as four hundred and fifteen million pounds 0:13:16.160 --> 0:13:19.640 on festive chocolate this season, but this year, soaring cocoa 0:13:19.640 --> 0:13:22.840 prices are threatening to push prices even higher. So what 0:13:22.880 --> 0:13:25.840 will this mean for Europe's confectionery sector. Well, for more, 0:13:26.160 --> 0:13:28.520 let's go to London and bring in Bloomberg Daybreak europe 0:13:28.520 --> 0:13:30.840 banker Caroline hepgar Tom. 0:13:30.960 --> 0:13:35.080 A difficult harvest season for crucial West African farmers has 0:13:35.080 --> 0:13:38.199 seen cocoa prices shoot up by more than one hundred 0:13:38.240 --> 0:13:42.320 percent this year, raising costs for the world's chocolate makers 0:13:42.600 --> 0:13:46.280 that risk being passed on to consumers. The record breaking 0:13:46.360 --> 0:13:50.600 rally has sent Coco's a fourteen day relative strength index 0:13:50.640 --> 0:13:54.280 above seventy percent. This is a signal to some that 0:13:54.400 --> 0:13:57.960 prices may have jumped too fast, but that has been 0:13:58.000 --> 0:14:01.240 the case several times since January, and cocoa prices are 0:14:01.280 --> 0:14:04.240 still climbing higher now ahead of one of the biggest 0:14:04.320 --> 0:14:09.120 days on the calendar for chocolate consumption. Global supplies are stretched, 0:14:09.440 --> 0:14:12.600 with farmers skeptical that incoming rain can make up for 0:14:12.640 --> 0:14:16.400 a season decimated by hot and dry weather in the 0:14:16.440 --> 0:14:21.560 most important cocoa producing regions. Bloomberg's opinion columnist Javier blast 0:14:21.560 --> 0:14:24.600 says that he's been stocking up on sweet treats in 0:14:24.640 --> 0:14:26.880 anticipation of a shortage. 0:14:27.240 --> 0:14:29.960 I'm a stockpilings on chocolate because we eat quite a 0:14:30.000 --> 0:14:33.720 lot at home, must confess that. And the price of 0:14:33.760 --> 0:14:35.880 coco is app one hundred and fifty percent. You make 0:14:35.960 --> 0:14:38.840 chocolate out of coco, a bit of sugar, a bit 0:14:38.880 --> 0:14:42.359 of milk. Prices of chocolate on the on the supermarket, 0:14:42.440 --> 0:14:45.800 it's gonna go up and go up quite significantly over 0:14:45.800 --> 0:14:49.920 the next six months. The market for coco is facing 0:14:50.000 --> 0:14:55.960 a structural deficit. Supply is well behind the demand. Probably 0:14:56.000 --> 0:14:59.840 the gap between demand and production is going to be 0:14:59.840 --> 0:15:02.800 in twenty twenty four. The largacy has been at least 0:15:02.800 --> 0:15:06.200 in sixty five years. So we have a problem and 0:15:06.240 --> 0:15:09.600 the only cure for the market right now is higher prices, 0:15:09.640 --> 0:15:11.440 or we have going to see a bit of higher 0:15:11.560 --> 0:15:16.040 prices in the supermarket. So I'm just anticipating from that. 0:15:16.040 --> 0:15:20.240 That was Bloomberg opinion columnist Javier Blast sharing his perspective 0:15:20.280 --> 0:15:23.200 there now. He might just be right to suggest that 0:15:23.240 --> 0:15:25.720 things will get even worse before they get better. In 0:15:25.760 --> 0:15:28.880 the Ivory Coast, the world's biggest cocoa producer in the world, 0:15:29.280 --> 0:15:33.560 cocoa farmers are busy cleaning their plantations, applying chemicals and 0:15:33.600 --> 0:15:38.480 pruning trees in preparations for the mid crop harvest, clinging 0:15:38.520 --> 0:15:41.560 onto the hope that better weather can make up for 0:15:41.600 --> 0:15:44.600 the losses that they've seen. We've been covering this story 0:15:44.640 --> 0:15:47.760 closely at Bloomberg, and our analysis has shown that the 0:15:47.840 --> 0:15:51.600 coco crisis is being felt the most here in Europe, 0:15:51.840 --> 0:15:56.080 which is also the world's biggest chocolate consuming region, because 0:15:56.160 --> 0:15:58.880 of new sustainability rules which are threatening to make the 0:15:58.960 --> 0:16:03.640 shortage of beans even worse. EU regulations aimed at stopping 0:16:03.680 --> 0:16:08.680 products which could harm forests iedforestation from being sold in 0:16:08.760 --> 0:16:12.080 shops here could make it even harder for chocolate makers 0:16:12.080 --> 0:16:15.840 to secure the supplies that they need, and it looks 0:16:15.880 --> 0:16:17.840 like the jump in prices is here to stay. The 0:16:17.880 --> 0:16:23.440 International Cocoa Organization projected that global cocoa supply deficits would 0:16:23.520 --> 0:16:28.000 increase by four hundred and five percent in the years ahead. 0:16:28.160 --> 0:16:33.120 This as climate change only heightens the threat to cocoa production. Now, 0:16:33.160 --> 0:16:35.440 all of these challenges in production are likely to have 0:16:35.440 --> 0:16:38.440 a knock on effect on consumers hoping to snag a 0:16:38.520 --> 0:16:42.080 sweet treat this Easter. Manufacturers could be forced to increase 0:16:42.120 --> 0:16:46.760 prices and shrink production, as well as diversify away from 0:16:46.840 --> 0:16:50.840 chocolate products. In retail terms, there's set to be little 0:16:50.880 --> 0:16:54.320 price difference actually between some of the luxury chocolate products 0:16:54.640 --> 0:16:58.800 and their traditionally more budget friendly counterparts. Is something I've 0:16:58.800 --> 0:17:02.920 been talking to our Bloomberg Commodities reporter Mumbig Guitar About 0:17:03.320 --> 0:17:08.440 and retail reporter Helen Chandler wild Now. I began by 0:17:08.480 --> 0:17:12.359 asking Mumbie how bad the situation is for coco producers 0:17:12.440 --> 0:17:12.960 right now? 0:17:13.240 --> 0:17:16.919 I think, let's first a later base here. In just 0:17:17.200 --> 0:17:20.800 less than three months, cocoa futures have doubled. So we 0:17:20.880 --> 0:17:24.280 started the year at four thousand dollars a ton, and 0:17:24.440 --> 0:17:27.080 right now we are above eight thousand dollars a ton, 0:17:27.359 --> 0:17:29.800 and all this is because of the cocoa production issues 0:17:29.840 --> 0:17:32.439 that we have in every Cost and Ghana. These are 0:17:32.480 --> 0:17:35.399 the two biggest coco producers. 0:17:34.840 --> 0:17:35.240 In the world. 0:17:35.280 --> 0:17:38.800 They produced two thousand of global production, so any declines 0:17:38.840 --> 0:17:42.680 in those two countries will be felt globally. Ghana alone 0:17:42.680 --> 0:17:44.840 will have a drop of about twenty percent, and so 0:17:44.960 --> 0:17:47.359 we livery cost and we are seeing that in the 0:17:47.440 --> 0:17:51.040 export and arrivals data that we are getting. So production 0:17:51.160 --> 0:17:55.080 has been pretty disappointing. I don't think the industry expected 0:17:55.160 --> 0:17:57.639 it to be this disappointing, and that's why we are 0:17:57.640 --> 0:18:00.919 seeing the market rally this much. Because of that, we 0:18:00.960 --> 0:18:03.960 are going to have a third year of coco deficit. 0:18:04.119 --> 0:18:05.880 And we love our chocolate too much. 0:18:06.920 --> 0:18:10.920 Yes, absolutely, Why have we seen such a radical move 0:18:11.000 --> 0:18:13.000 and prices? Is it all around weather? 0:18:13.920 --> 0:18:17.480 Yes, it's all around weather and also diseases. But also 0:18:17.520 --> 0:18:20.240 we know that farmers have not been well paid for 0:18:20.280 --> 0:18:22.879 a really long time. If you're not well paid, then 0:18:22.920 --> 0:18:25.800 you don't have the incentive to invest back into your farm, 0:18:25.840 --> 0:18:28.640 and so they've not pretty much taken care of their 0:18:28.640 --> 0:18:32.520 farms or invested in fertilizers, Okay, because I needed to 0:18:32.600 --> 0:18:36.199 keep the diseases at bay. But also the weather change 0:18:36.280 --> 0:18:40.720 has made it incredibly difficult for those trees to remain resilient. 0:18:41.760 --> 0:18:46.040 So that's the baseline that producer prices are going up, 0:18:46.080 --> 0:18:48.840 farmers prices are going up. How much more expensive do 0:18:48.880 --> 0:18:51.480 you think a chocolate is going to get for the consumer? 0:18:52.520 --> 0:18:55.280 So the chocolate that you're currently seeing on the shelf 0:18:55.800 --> 0:18:59.880 was probably manufactured sometime towards the end of last year 0:19:00.200 --> 0:19:03.359 when prices were still very low. So we may see 0:19:03.359 --> 0:19:06.639 some increments in chocolate prices given just the rally that 0:19:06.680 --> 0:19:09.360 we saw last year. But I think more pain will 0:19:09.400 --> 0:19:12.119 come towards the end of this year when you're buying 0:19:12.160 --> 0:19:15.320 your hallow in chocolate, when you're buying your Christmas chocolate, 0:19:15.400 --> 0:19:18.160 and next year's Easter, because we have to take their 0:19:18.600 --> 0:19:22.200 account the doubling of prices just between January and match. 0:19:22.480 --> 0:19:25.359 So as much as it will be expensive this time, 0:19:25.880 --> 0:19:28.719 I think the pain will be felt much more towards 0:19:28.760 --> 0:19:29.560 the end of the year. 0:19:29.800 --> 0:19:33.400 And then also you've written about how perhaps the effects 0:19:33.400 --> 0:19:35.639 of the shortage are going to be more pronounced in 0:19:35.680 --> 0:19:37.360 Europe than elsewhere why. 0:19:37.400 --> 0:19:40.760 And Europe tends to be very responsible when it comes 0:19:40.800 --> 0:19:45.760 to be to its imports. So they have this European 0:19:45.800 --> 0:19:50.440 deforestation law that's going to make it difficult for Importance 0:19:50.480 --> 0:19:52.879 to bring in coco. They have to make sure that 0:19:52.960 --> 0:19:55.199 the cocoa that they bring in was not grown on 0:19:55.280 --> 0:19:58.399 deforested land. Now, to make sure and to prove to 0:19:58.440 --> 0:20:00.880 the ear that it wasn't grown on first that land, 0:20:01.119 --> 0:20:05.240 they need to map every single farmer. So every shipment 0:20:05.280 --> 0:20:08.359 that arrives at the EU ports has to be traceable 0:20:08.560 --> 0:20:10.760 back to the farm. If you can't trace it back 0:20:10.760 --> 0:20:12.680 to the farm, you can't bring it to the EU. 0:20:12.920 --> 0:20:16.600 Okay, So there's a price to that to consumers then, 0:20:16.680 --> 0:20:19.760 isn't there? Yes, in terms of quality standards I suppose 0:20:19.760 --> 0:20:22.960 and traceability. Do you think the cocoa futures are likely 0:20:23.080 --> 0:20:24.080 to stay high? 0:20:24.200 --> 0:20:24.320 Then? 0:20:24.359 --> 0:20:27.560 And if you say the feed through to consume prices 0:20:27.600 --> 0:20:31.800 hasn't actually yet hit, what about the future's market. 0:20:31.160 --> 0:20:35.200 Because the future market actually looks at deliveries in the future. 0:20:35.640 --> 0:20:38.520 I think we I wouldn't say whether we've picked or not. 0:20:38.680 --> 0:20:40.879 I don't have the crystal ball. It's had to see. 0:20:41.119 --> 0:20:44.080 But in such a volatile market will probably continue to 0:20:44.080 --> 0:20:47.000 see the wild swings that we've been seeing, so we'll 0:20:47.000 --> 0:20:49.400 see another shoot and then we might see a correction 0:20:49.520 --> 0:20:53.040 at some point. But if these shortages persist, it's going 0:20:53.080 --> 0:20:55.760 to take some time before these coco prices come down. 0:20:56.000 --> 0:20:59.359 Okay, and then what does it mean. I suppose for 0:20:59.440 --> 0:21:02.280 others in the manufacturing chain along. 0:21:02.040 --> 0:21:06.199 The line right now, they are trying to increase the 0:21:06.280 --> 0:21:10.240 prices for your chocolate just so that they can absorb 0:21:10.440 --> 0:21:13.000 that part of the cost, and consumers can absorb part 0:21:13.040 --> 0:21:15.520 of that cost. But they're also paying so much for 0:21:15.600 --> 0:21:19.679 coco lasts. Yesterday we ran a story about grinder in 0:21:19.760 --> 0:21:23.159 Asia who's paying a premium just to get the cocoa beans. 0:21:23.280 --> 0:21:26.399 So there's a scramble among manufacturers for who can pay 0:21:26.720 --> 0:21:30.440 more for cocoa, particularly in markets that are more liberalized. 0:21:30.480 --> 0:21:33.800 But you may start to see some manufacturers push to 0:21:33.840 --> 0:21:38.200 you some white chocolates or chocolate, it's more nuts and 0:21:38.600 --> 0:21:41.240 fruit so that they can try and bring down their 0:21:41.520 --> 0:21:42.480 coco consumption. 0:21:43.119 --> 0:21:47.000 Interesting. Let me bring in Helen Chandler World now to 0:21:47.320 --> 0:21:50.119 the conversation. So we've heard a little bit about the 0:21:50.200 --> 0:21:54.200 cocoa issues and prices having sowed in recent months. How 0:21:54.240 --> 0:21:56.879 expensive do you think chocolate is going to get for 0:21:56.920 --> 0:21:58.760 the end consumer, Helen See. 0:21:58.840 --> 0:22:01.000 I think, as we're just here, there will probably be 0:22:01.040 --> 0:22:03.760 a slight delay on prices increasing just because of the 0:22:03.760 --> 0:22:06.320 amount of time that takes actually make the chocolate, which 0:22:06.520 --> 0:22:09.720 does take a little bit of time. But we have 0:22:09.880 --> 0:22:12.000