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Why are chocolate prices jumping?

A girl looks over chocolates in a case at Jacques Torres Chocolate in the Soho neighborhood of New York.
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A girl looks over chocolates in a case at Jacques Torres Chocolate in the Soho neighborhood of New York.

A box of chocolates may be full of surprises. But this Valentine's Day, you can count on one thing.

It's going to cost you more than last year.

Thanks to a surge in prices for cocoa, the main ingredient in chocolate, the retail price of a box of sweets may come as a shock this year.

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Roughly half of those who give gifts to a loved one choose candy, according to the National Retail Federation. A third give flowers, another half get cards, 1 in 5 buy jewelry; the average gift-giver plans to spend $134 this year.

If your gift list includes a few boxes of chocolates, your budget won't go far.

Here's what's driving chocolate prices higher:

How much more are we talking about?

The increase in retail price varies: Some chocolate-makers have cut back on the size of each piece or substituted more milk chocolate for dark chocolate, reducing the cost.

Prices have been moving up gradually. Hershey's and other chocolate-makers announced price hikes last year but have been rolling them out slowly to blunt the impact. But with cocoa prices up some 40 percent in the last two years, they've had to pass along the cost to chocolate lovers.

So what's up with cocoa prices? Aren't commodity prices falling?

Most of them are, but not cocoa. As with all commodities, the simple answer is that demand is rising faster than production.

One reason is that cocoa is a lot harder to grow than, say, corn or soybeans. The cacao tree—the source of all things chocolate—is pretty fussy. That's why all of the cocoa produced in the world is grown within 20 degrees of the equator—where the climate is just right. Some 70 percent comes from West Africa; a third from Ivory Coast.

Cocoa growers also have to contend with the usual uncertainties that Mother Nature hands farmers—from drought to nasty, cocoa-destroying diseases like witches' broom disease or frosty pod rot. With production concentrated in a relatively small part of the world, those setbacks can have big impact on a given year's crop.

This year's was relatively good, but prices shot up based on worries about another disease. Some traders feared the outbreak of the Ebola virus would threaten production—even though the epidemic didn't spread to those growing regions.

If production is holding up, why are prices rising?

Because demand is increasing faster than suppliers can keep up.

The world is apparently developing a real sweet tooth. In 2013, total consumption outpaced production by more than 200,000 metric tons. Some analysts think that gap will continue to widen as the chocolate lovers demand more product than growers can keep up with.

Who's eating all this chocolate?

Everyone, apparently. Some of the demand is coming from the developing world, especially China, where rising incomes are helping consumers splurge on discretionary treats like chocolate.

Despite their economic woes, Europeans are consuming more every year. Western Europe is the biggest market for chocolate, led by Switzerland and the United Kingdom. Belgians love their chocolates, too.

And while U.S. consumption has eased, more chocolate lovers are switching to dark chocolate products, which use a lot more cocoa than milk chocolate.

How high are prices going?

Like all markets, rising prices eventually cut demand and reverse course. That seems to have happened in the last few months as cocoa prices have backed off their highs of last fall.

Growers are also trying to boost demand by planting more trees and working with agricultural researchers to develop diseased-resistant strains and heartier plants that will grow in other regions.

But that will take time. It takes a cacao tree five years before it produces its first beans.

In the meantime, if you can't live without chocolate, you might want to stock up.