Cocoa prices have skyrocketed to levels unseen in decades, overtaking record price increases from the 1970s
Cocoa prices have recently skyrocketed to levels unseen in the past five decades, and then increased by an additional 15%. This remarkable escalation has overtaken highs from the 1970s when cocoa demand experienced a significant upswing, driven by the expansion of the confectionery industry and the growing popularity of chocolate products. During that era, cocoa production remained heavily concentrated within a select group of nations, rendering the cocoa supply chain highly susceptible to various disruptions, ranging from political instability to inclement weather events.
The principal catalyst behind the recent surge in cocoa prices can be attributed to a pronounced supply deficit, exacerbated by underwhelming cocoa yields, which have been plagued by crop diseases and adverse weather conditions. Many of these underlying issues are anticipated to persist, prompting the pivotal question: Why does Mintec anticipate a decline in cocoa prices for the year 2024?
"The only cure for high prices is high prices."
An age-old adage posits that "The only cure for high prices is high prices." If this adage holds true, then it logically follows that prices should soon be in a state of decline. The current price levels undeniably exert significant pressure, potentially dampening consumer demand. Moreover, these prevailing price levels significantly surpass what fundamental regression analysis identifies as a fair valuation, demonstrating a classical price bubble.
Historical precedent reinforces this notion, as witnessed in the late 1970s when cocoa prices plummeted from GBP 3,076 to GBP 1,581, marking a staggering decline of 48.6% within just six months. The inevitable occurrence of a similar correction is inevitable; the only question that remains is "when." Traditionally, cocoa prices experience a seasonal peak in November, providing a glimmer of hope that the zenith may already be within sight.
Seasonality
While seasonality alone may not wield substantial predictive power, its conjunction with the pronounced price bubble lends weight to the argument for an imminent price peak. Nevertheless, it is essential to acknowledge that a definitive signal of a downtrend has not yet materialized, necessitating vigilant monitoring in the interim. Meanwhile, the prevailing uptrend persists, albeit with diminishing upside potential.
Navigating the current landscape is tricky to say the least, but Mintec’s dynamic forecast feature can shed some light on the future of the Cocoa market.
