The price of cocoa is rising faster than Bitcoin. How is it possible?

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The price of cocoa (COCOA) basically since the end of last year is growing rapidly. In the first three months of this year alone, cocoa gained more than 143% (green color) and significantly even surpasses Bitcoin, which grew by roughly 60% over the same period. But what is behind this explosive growth that has driven the price of the main production ingredient of chocolate to more than $10,000 per tonne?

Source: Bloomberg

Cocoa is made from the fruit of the cocoa tree. It is mainly cultivated in Africa, specifically in several countries such as Ivory Coast, Ghana and Cameroon. These countries account for roughly two-thirds to three-quarters of cocoa production, with the rest being produced in South America, Asia and Oceania.

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The cacao tree needs for its growth specific conditions, which few countries can provide him. Last year, however, in many countries where cocoa is grown, above average rainy, which made it difficult to transport crops and, for example, to dry beans. Another problem was that the rainy weather led to a higher rate spread of disease and in some cases even to the destruction of entire cocoa trees. Recently, more has been added to the problems windy weather, which also caused problems for the trees. All these factors have meant that in the case of the largest producer, Ivory Coast, production fell by approximately one third. It is expected for the whole year 11% drop in world production, which significantly increases prices, as demand is growing slightly and has been higher than production in recent years, so producers have had to use up their previous stockpiles. In Africa, the selling price is also partially set and regulated by the government, which further complicates the market situation and creates room for corruption and the black market.

These events affect many markets in the modern financial world. In addition to the price of cocoa itself, we can mention, for example, the shares of food companies Nestlé, Hershey and Mondelez. Although some confectionery manufacturers have contracted to supply at pre-agreed prices, if prices were to remain at a similar level, it is almost certain that we would see a significant increase in the price of chocolate, which has been growing continuously in recent months. However, manufacturers already they are looking for an alternative, so that they do not have to pass on higher prices to customers. These include fillings made from other ingredients, such as caramel, vanilla or lemon filling. Many companies also try to promote other types of products more, such as gummy bears or candies. So it is possible that the market will eventually self-regulate due to high prices, as it tends to do in extreme growth. However, it is the price of cocoa that is the most obvious sign of this huge movement.

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Source: xStation

If you also want to take advantage of these price movements, you can find CFDs for this market in XTB under the ticker COCOA. It is a financial instrument with a leverage of 1:10, which can be bought to speculate on further price growth, or short if you expect prices to fall. You will also find the aforementioned in the platform stock titles associated with cocoa production.

More information can be found at: https://www.xtb.com/cz

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The article is in Czech

Tags: price cocoa rising faster Bitcoin

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