According to a National Retail Federation survey, Americans will spend $4.1 billion on candy this Halloween, up from $3.9 billion last year.

Candy prices rose at an annualized pace of 7.7% last month, according to the Bureau of Labor Statistics, with higher cocoa prices leading the charge: Professional services firm PwC told NBC News earlier this month that the price of nonchocolate Halloween sweets is up 1.8% from last year, while Halloween chocolate prices are up a whopping 15.5%.

By comparison, overall inflation rose 3.7% in September. As you know, that less dramatic pace is considered a horror show, so consider chocolate prices the jump scare of the season.

To find out how things got here, one needs simply look to the last few years of cocoa economics, where the supply-and-demand dynamics have played out more nightmarishly than an Edgar Allan Poe story.

Cocoa’s Horror Story

Cocoa prices were a sleepy corner of the commodities market for most of this century, generally trading between $1,000 and $3,500 per metric ton from 2000 through the third quarter of 2022, according to Federal Reserve data.

Things began to change in 2023. That year, speculative traders, including hedge funds, entered the cocoa futures market in previously unseen numbers. “With chocolate companies also attempting to secure supplies, the cocoa futures market reached prices not seen in over 40 years, as the futures markets were traditionally only used to hedge risk,” said Bureau of Labor Statistics Economist Natalie Ho, in a report published last month.

By early 2024, those speculators had purchased $8.7 billion worth of futures contracts in London and New York. In February of that year, New York cocoa futures topped $5,800, a record at the time.

The record didn’t stand for long. And the hedge funds weren’t the primary cause of the increase in prices; they were only a secondary contributor.

The major cause was a perfect storm of, well, storms. For much of the first half of 2023, unusually heavy rains damaged crops and led to an outbreak of fungal black pod disease. Later in the year, egged on by El Niño, conditions did a total 180, ushering in heat waves and droughts that dried out cocoa trees and increased the spread of cocoa swollen shoot virus that’s carried by insects in hot seasons.

Harvest yields nosedived, cocoa stockpiles were depleted and, by December 2024, cocoa traded at a peak of $12,565 per metric ton.

Cocoa harvests subsequently rebounded, driving prices far down from the peak. In March of this year, New York cocoa futures traded as low as $2,888, more than 70% less than the 2024 high.

In case you’re wondering, yes these volatile swings were a nightmare for many of the hedge funds that speculated on cocoa. For example, Andurand Capital Management scaled back its exposure last year after its flagship commodities fund at one point fell 57%.

Naturally, the turbulence has also reached consumers, with cocoa volatility causing chocolate prices to rise (cocoa is the main ingredient in chocolate). And it’s contributed to a confectionary nightmare that far outpaces the white-hot inflation of the last few years. According to an analysis by FinanceBuzz, Halloween candy prices are up 71% since 2021, more than three times the 22% overall inflation rate in the same period.

There’s no immediate sign of relief, either. While cocoa commodity prices are down from their record 2024 peak, prices lag because companies had to work through prepurchased bean inventories. Manufacturers contract months or sometimes a year or two in advance, meaning consumers are still paying for the past.

Even worse, cocoa prices are rising again. And conditions that harken back to the 2023-2024 harvest catastrophe are looming.

Markets Cuckoo for Cocoa

December cocoa futures closed at $5,645 in New York on Friday, up nearly double from their March lull. JPMorgan has forecast that prices will remain structurally higher, around $6,000 per metric ton, for the next few years.

There are a handful of bullish factors set to keep it in this elevated range.

One is demand. Last week, quarterly cocoa grindings reports, which track the volume of raw cocoa beans processed, from around the world suggested global demand for chocolate and cocoa products is considerably stronger than expected.

The Cocoa Association of Asia said cocoa grindings rose a record 29% year over year in the third quarter, almost double analysts’ expectations. The European Cocoa Association reported grindings rose 3.2% when analysts expected a decline.

Grindings in North America decreased by 2.5%, according to the National Confectioners Association. However, the US, Mexico and Canada are a much smaller processing hub, processing less than half the cocoa bean volume of Asia and less than a third of Europe. North America still sources a significant portion of cocoa derivatives from foreign suppliers, meaning Asia and Europe are viewed by the market as better indicators of demand.

That’s notable, as one of the reasons cocoa prices fell from their 2024 peak was consumers cutting back on chocolate. US chocolate volume sales have fallen 11.4% to 291 million pounds since 2021, according to Circana data cited by Food Navigator. Confectioners have made up for this, and higher cocoa prices, by hiking retail prices, with US chocolate dollar sales climbing 25.5% to $3.8 billion since 2020.

A second, more unfortunate factor that is bullish for prices is a return of weather worries. Earlier this month, forecasters at the US Climate Prediction Center said they believe an intense El Niño pattern that formed over the tropical Pacific last month will be the strongest in over 75 years and last until as late as March 2027.

Like it did in 2023-24, an El Niño this seismic would likely bring hotter, drier conditions to West Africa, creating conditions that are suboptimal for cocoa harvest.

In Ghana and Côte d’Ivoire, the two West African nations that produce 60% of the world’s cocoa, surveys have already indicated that current harvests are in trouble.

Ousmane Attai Ouedraogo, an independent cocoa consultant based in the Ivorian capital Abidjan, wrote on LinkedIn in July that early surveys of the country’s 2026-27 cocoa crop indicated Côte d’Ivoire could produce 1.7 million metric tons (MT) during the season, down from the 2.2 million MT in 2025-26. Officials from the country’s cocoa council and exporters told Reuters in August the figure could be even lower, around 1.4 million MT.

The Ghana Cocoa Board estimated in August that the country’s 2026-27 harvest will decline 13% to 650,000 MT.

A final bullish factor is the earnings of cocoa farmers, who have had to deal with enough volatile price swings for one lifetime.

Equally consequential for long-term supply is what happened to cocoa farmers’ income. As prices sank well below their record 2024 highs earlier this year, Côte d’Ivoire cut the official amount paid to farmers by 60% in March. Weeks earlier, Ghanaian farmers were dealt a slightly less merciless farm-gate price cut of 28.6%.

Cuts make it harder for farmers to afford key inputs like fertilizers and fungicides, and reduce their ability to hire laborers, all of which can contribute to weaker future crops.

The Chocolate Factories

Chocolate makers have tried different tactics to deal with the price swings of recent years.

Hershey was one of many that cut the amount of cocoa in some products, substituting it with a compound made from vegetable oil.

That earned a rebuke from no less than the grandson of H.B. Reese, the creator of Reese’s Peanut Butter Cups, who said the company was asking consumers “to believe a story that no longer matches what’s inside the REESE’S orange wrapper.”

After his complaints went viral, the company pledged to restore the “classic milk and dark chocolate recipes” in all its Hershey’s and Reese’s offerings by 2027.

Hershey shares are down more than 7% this year as investor concerns about elevated cocoa costs continue to weigh. Even though the company bested earnings expectations in the second quarter, that was mostly supported by a 12% hike in product prices offsetting an 8% decline in volume.

Hershey has tried to diversify away from chocolate, mirroring rivals like Mondelez and Nestle that have much broader portfolios, and its North America Salty Snacks sales increased 23% in the quarter.

Another major chocolatier, Switzerland’s Lindt, went all in on price hikes without sacrificing chocolate. The company’s sales dropped 0.9% in the first half of the year, and volume fell 7.5% after it implemented “necessary groupwide price increases of 11.8%.” This summer’s European heat waves also stifled demand and, last month, executives were forced to slash their full-year organic sales growth forecast to 0% to 2% from 4% to 6%. Lindt shares are down more than 25% this year.

There is, nevertheless, hope. When the Swiss-Belgian cocoa processor and chocolate manufacturer Barry Callebaut reported its most recent half-year earnings in July, it estimated that the global chocolate market declined 4.4% in the three months from March 1 to May 31. But it also said that its own group volume turned positive in that period for the first time in more than two years, and that it expects a gradual recovery for the broader chocolate industry.

The business of cocoa is facing immense price pressures, but last week’s reported grindings also show there is unexpectedly strong, resilient demand. That’s somewhat fitting. After all, it wouldn’t be chocolate if it wasn’t a little bittersweet.