Since ancient times, the Greeks considered cocoa to be the food fit for Gods, as it was considered to provide cocoa consumers with a long life. In today’s modern times, this heavenly commodity is rewarding investors with incredibly smart investment opportunities. Despite the COVID-19 pandemic playing havoc with the rest of the commodities market, the cocoa futures market analysis reports from investment experts have an incredibly positive outlook as far as the commodities rotational play is concerned.
At the end of the last fiscal, the global cocoa prices saw a significant drop of 19% in prices due to the start of COVID-19 lockdown measures. In June, the prices slipped even further by an 8% drop however more recently, the cocoa prices have shown a promising rise every month.
In July, cocoa surged 7% in value which brought it up by a remarkable 4% in August.
Reasons for the Rise in Rotational Play of Cocoa Commodity
In March, the Dollar Index collapsed as it reached the near-zero US rates and Congress passed trillions in a stimulus package. This prompted immense hot money to enter the commodities market in an effort to recover profits from gold, silver, and other similar assets. This surge swept the price of Cocoa with it which was around 24% along with Arabica coffee in June and July before a slight dip in August.
Apart from the rush of investment in cocoa as a commodity, market analysts also detected a few positive basic drivers behind the rise. However, as the COVID-19 pandemic disrupted the supply and demand of cocoa the overall aspects of the crop are unclear at this stage.
According to Jack Scoville, an analyst at the Price Futures Group based out of Chicago, the COVID-19 pandemic has raised severe demand concerns, especially since it is expected to make a comeback in Europe and the US with chances of the lockdown being implemented once more to combat the pandemic. Scoville adds that now as the harvest of the cocoa crop in West Africa is over, the results are positive. The reports coming out of the cocoa-rich West African region shows that the cocoa harvest has been significant, and the Southeast Asian cocoa production market is also looking positive after a good harvest.
However, these positive aspects have not alleviated the concerns about supply and distribution from farms to the market which could again be affected in the coming months. Today, cocoa products are considered to be necessities in major cocoa-consuming markets and have become part of the consumer’s diet, as opposed to being a luxury food product until a few years ago. Thus, any disruptions in the supply chain and difficulty in procuring cocoa will eventually result in raising its price.
Supportive Farmer-Friendly Cooperatives will Boost Cocoa Price
The Co-op Group from the UK, along with other farmer-friendly cooperatives are working to get fair prices of products for the farmers, which eventually supports the cocoa futures in London and New York. According to Cathryn Higgs, head of policy for Co-op Group, they are committed to helping farmers and others involved in their supply chain that has been severely affected by the restrictions from the COVID-19 pandemic. She also added that the Co-op Group is redirecting its funds (as much as GBP 310,000 under the Fairtrade label) to support cocoa farmers worldwide, including in Peru which has been adversely affected by the corona-virus crisis.
According to a report in the Financial Times in the second week of August, cocoa producers are also waiting to support the price rise. Another report in the Financial Times highlighted the fact that farmers in Ghana and Ivory Coast, which are the two biggest cocoa-producers in the world, are holding on to their stock in hopes of getting a better price and have decided not to sell their crop which is normally harvested in October every year.
Experts’ Prediction about Cocoa Price Rise
Although cocoa futures market analysis experts expect a dip in cocoa prices in the short-term due to weakening demands from consumers, there is great hope for a price rise in the long-term for the commodity. Ideal weather conditions prevailing in the West African region are expected to produce a bumper crop this year.
With growing concerns about supply bottlenecks in the near future, market experts are extremely optimistic about the long-term prospects for the crop as a rising number of health-conscious consumers are realizing the health benefits of cocoa.
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