Threats to the Cocoa Supply

Speculating on Cocoa Prices Amidst Uncertainty

Cocoa COT report

Cocoa: Trending

When 70% of the world's cocoa production comes from West Africa, any issues there have far-reaching consequences. West African cocoa growers have faced years of neglect and underinvestment due to low cocoa prices. This has resulted in weakened cocoa trees and increased vulnerability to volatile weather conditions, creating a perfect storm that could lead to a historic cocoa shortage.

The region has experienced excessive rainfall since June, which, combined with the already weakened trees due to a lack of proper care, sets the stage for potential diseases, lower yields, and reduced cocoa quality.

Our main concern is that the current wet weather pattern might transition into the drier Harmattan wind season, which typically runs from late November to early March. We anticipate that this year's Harmattan season could be particularly severe. This would bring challenges such as reduced sunlight due to the high sand content in the air and harsh winds that could damage the budding cocoa crop for 2024.

If our prediction of an exceptionally destructive wind season proves accurate, it's difficult to anticipate just how high cocoa prices could rise to address this potentially unparalleled situation.

Our trend models are long cocoa still. I would be on alert as we search for a final blow off top. Tighten stops, take profits… however you do it, that is up to you. Either way, I would be ready for another possible move higher.