Cocoa Market in Overdrive: The Final Epic Wave

All-Time Highs and Managing Volatility

Cocoa…

Weekly

We still have an optimistic about the cocoa market because of several factors. Firstly, years of neglect and underinvestment in West African cocoa trees are now causing severe problems. These trees are facing diseases and are producing lower yields and lower-quality cocoa due to both these diseases and unusual, excessively rainy weather.

Although there are signs that cocoa demand is weakening, it's not enough to offset the lost production and the further losses we anticipate in 2024.

Furthermore, the impending El Nino event, expected to peak by January 2024, is likely to make the windy season in West Africa exceptionally severe. This could result in significant damage to their buds, leading to a need for historically high cocoa prices. These prices would be necessary to allow trees to recover, attract investment for planting new trees, improve tree care, and enable other cocoa-producing regions to gain a larger market share compared to West Africa.

The wind season typically occurs from late November to early March in West Africa. Our analysis suggests that the spring and summer of 2024 will likely be the time when cocoa prices reach their highest point. This peak could potentially exceed the all-time highs seen in 1976 by a significant margin.

As prices rise, there will likely be increased price volatility. Stay ready for a wild ride in the cocoa market.