Cocoa prices: A chocoholic’s nightmare

A squeeze on the supply of cocoa has sent prices soaring.

"Cocoa futures are piping hot," says Alexandra Wexler in Barron's. Prices in New York and London have risen by 25% to two-year highs since June, amid a supply squeeze in the market. Demand is recovering in the largest chocolate markets, America and Europe.

Cocoa processing jumped 8% year-on-year in the US in the second quarter, and luxury chocolate consumption has recovered faster than expected, with Switzerland's Lindt reporting annual sales growth of 13% in North America in 2013's first half. European demand also looks more robust, now that the recession is ending.

Meanwhile, dry weather in West Africa, which accounts for two-thirds of the world's cocoa, is hurting supplies. Stocks in warehouses have fallen by 11% in a year, as processors concerned they won't be able to get beans from suppliers have resorted to them.

Demand is set to outstrip supply by 130,000-170,000 tonnes in the year ahead, says Emiko Terazono in the FT. And the rally has room to run: Derek Chambers of commodity trader Sucden says higher prices are needed to stimulate production.

Hedge funds have been piling in, and Citigroup's Sterling Smith expects the supply shortage to be bigger than markets currently expect.

Recommended

Lab-grown meat: the new agricultural revolution
Soft commodities

Lab-grown meat: the new agricultural revolution

Vegan alternatives are taking off, but the future of food technology lies in lab-grown meat – cultivating steaks and burgers from animal cells, says A…
16 Apr 2021
Lab-grown meat: how “moo’s law” will drive innovation
Soft commodities

Lab-grown meat: how “moo’s law” will drive innovation

Jim Mellon and Anthony Chow, co-founders of Aim-listed Agronomics, explain why they believe that “cellular agriculture” will benefit from massive long…
16 Apr 2021
How you can profit from the fast-growing cannabis industry
Soft commodities

How you can profit from the fast-growing cannabis industry

Once an investment taboo, the cannabis sector is poised to thrive in 2021. David Stevenson looks at how best to buy in.
16 Mar 2021
Invest in water and provide a buffer against future pandemics
Soft commodities

Invest in water and provide a buffer against future pandemics

Global water shortages have long hampered growth and development, and climate change has exacerbated the problem. Will the coronavirus pandemic be a t…
25 Feb 2021

Most Popular

Lab-grown meat: how “moo’s law” will drive innovation
Soft commodities

Lab-grown meat: how “moo’s law” will drive innovation

Jim Mellon and Anthony Chow, co-founders of Aim-listed Agronomics, explain why they believe that “cellular agriculture” will benefit from massive long…
16 Apr 2021
The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
Lab-grown meat: the new agricultural revolution
Soft commodities

Lab-grown meat: the new agricultural revolution

Vegan alternatives are taking off, but the future of food technology lies in lab-grown meat – cultivating steaks and burgers from animal cells, says A…
16 Apr 2021