Prices per ton of cocoa beans briefly dipped below their highs, but are now on the rise again this week. And analysts remind us that they are still many times higher than a year ago. Chocolate will definitely not be cheaper that way.
Over the past week, cocoa has become cheaper by 30 percent. Even to the lowest levels since mid-March. On Friday, New York futures fell as low as $6,990 per ton. Yesterday, however, a ton of cocoa points was traded for again 8.6 thousand dollarsaccording to the Nasdaq index.
“The price has varied in recent years 2200-2500 dollars per ton. I personally believe that it has the greatest influence on such a large increase in price panic and speculation,” says Václav Durďák, director of Čokoládovna Janek. “We also perceive fundamental reasons in the market, but an increase in hundreds of percent does not make sense“, he adds.
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Bad harvest
The rise in cocoa prices – which reached an all-time high of 11.7 thousand dollars per ton on April 19 – was caused by fears of a lack of supplies. Indeed, in West Africa – where about 70 percent of the world’s cocoa production is produced – the powerhouses Ivory Coast and Ghana are fighting a bad harvest due to bad weather. “In the longer term, prices are still many times higher. Even at the beginning of the year, cocoa cost less than now. And last year maybe half of it,” reminds Durďák.
Last week’s sharp drop reflects reduced liquidity in the cocoa market. This means that even small trade volumes can greatly affect prices. “The recent rains in West Africa have improved the outlook for production and with little liquidity in the markets, we are in a situation where any news – good or bad – will cause a huge reaction,” says Ole Hansen, Chief Commodity Strategist at Saxo Bank.
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Will it ever be cheaper?
The lack of liquidity stems from historically high cocoa prices, which discourage traders from buying the beans, analysts note.
At the same time, demand is still strong. According to the latest report of the European Cocoa Association the volume of grinding or grains processed to make chocolate in Europe fell by only 2.2 percent in the first quarter. Grinding statistics are used as a proxy for cocoa demand, with Europe being one of the world’s largest cocoa markets. And will the price ever return to last year’s values? “It’s possible, personally I’m looking more at the $4,000 limit, which I would perceive as positive and realistic,” concludes Durďák.
