currently experiencing unprecedented popularity, reaching an all-time high in
price on the New York exchange, hitting the $5800 mark by mid-February. The
price gained more than 30%, which is an all-time high. Let’s delve into the
factors driving this surge in the cocoa market and explore its potential
impacts on both markets and daily life.
To
begin, let’s take a look at the chart demonstrating cocoa price movements since
the beginning of 2024. The line is pretty straight. Additionally, as judged by the
volume indicator, the volume points are also high.
Over 30%
since the start of the year is massive, especially considering the relatively
short time frame of a month and a half. However, the following chart
illustrates even more remarkable growth. It began in 2023, with prices
skyrocketing by over 100%. Over the past five years, the increase has surpassed
150%.
However,
the critical change in the trend occurred not long ago – in 2023. There are two
factors affecting the industry that are tied to West African countries, Cote
d’Ivoire and Ghana, which are leaders in cocoa bean production.
The
first factor is the El Niño weather phenomenon, resulting in
warmer surface waters in the Pacific and subsequently causing hotter and drier
weather in the region. Such conditions lead to a decrease in harvest yields.
Simultaneously,
the cocoa trees are afflicted by the cacao swollen shoot virus, which has
plagued African farmers for the past few years. What’s more, they can’t replant
trees on the affected land for five years following the onset of the virus.
Earlier, farmers relocated to other forests to plant cocoa trees, but this
practice is restricted to preserve forests. With no cure for this disease, many
producers have opted to switch to alternative agricultural ventures.
Both of
these factors have significantly reduced cocoa supply, a trend that continues
to persist. Additionally, global tensions, such as those in the Red Sea, further exacerbate
concerns surrounding trade routes.
The
growth of cocoa prices naturally impacts both chocolate producers and
chocoholics. Higher prices may lead to increased costs for chocolate products,
potentially resulting in decreased sales volumes as consumers seek to
economize. However, the immediate effects of these changes may not be readily
apparent, as candy makers may choose to maintain prices to retain their
customer base.
This article was written by FL Contributors at www.forexlive.com.