{"id":9945,"date":"2024-05-21T12:30:55","date_gmt":"2024-05-21T12:30:55","guid":{"rendered":"https:\/\/economicherald.net\/?p=9945"},"modified":"2024-05-21T12:30:55","modified_gmt":"2024-05-21T12:30:55","slug":"chocolates-may-soon-be-luxuries-as-cocoa-prices-surge-and-how-investors-can-take-advantage-of-this","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=9945","title":{"rendered":"Chocolates may soon be luxuries as cocoa prices surge; and how investors can take advantage of this"},"content":{"rendered":"<p>Cocoa prices have skyrocketed recently<br \/>\nConsumers are likely to feel the pinch with higher chocolate prices and smaller servings<br \/>\nSo how do I get exposure to cocoa prices in my portfolio?<\/p>\n<p>\u00a0<\/p>\n<p>We\u2019ve read all the buzz about gold, silver, and copper prices shooting through the roof lately.<\/p>\n<p>But what\u2019s been flying under the radar is the <strong>cocoa price surge<\/strong>.<\/p>\n<p>Cocoa prices have been steadily climbing for the past two years, but in 2024, they\u2019ve hit a whole new level.<\/p>\n<p>The cocoa futures contracts doubled in the first three months this year, smashing records in March to reach historical highs of nearly US$10,000 per metric ton.<\/p>\n<p>On 19 April, cocoa futures contracts in New York hit an intraday record high of US$12,200 per metric ton.<\/p>\n<p>Prices have come down since, but analysts believe they won\u2019t stay there for long.<\/p>\n<p>\u00a0<\/p>\n<p><em><strong>Source: TradingEconomics<\/strong><\/em><\/p>\n<p>\u00a0<\/p>\n<h2>So, what\u2019s the deal?<\/h2>\n<p>Well it\u2019s a mixed bag but the main reasons for the rally are global supply shortage, chronic underinvestment in cocoa farms, and investors stirring the pot with speculative trading.<\/p>\n<p>Climate change is wreaking havoc on crops in West Africa, the main source of about 80% of the world\u2019s cocoa. According to the <a href=\"https:\/\/www.icco.org\/cocoa-market-report-for-march-2024\/\" target=\"_blank\" rel=\"noopener\"><em>International Cocoa Organization<\/em><\/a>, we\u2019re looking at a nearly 11% decline in global cocoa supply for the 2023\/2024 season as a result.<\/p>\n<p>Other deep-seated issues are also contributing to the problem, notably the chronic underinvestment in cocoa farming.<\/p>\n<p>Presently, most cocoa farming is in the hands of small-time farmers who are dealing with low earnings and not enough cash to put back into their farms \u2013 which has led to diminishing yields over time.<\/p>\n<p>\u201cCocoa represents a market where producers yield a commodity of significant value but receive a disproportionately low portion of the overall value chain,\u201d said a recent research report out of <em>J.P. Morgan.<\/em><\/p>\n<p>\u201cConsequently, the rate of replanting remains minimal, resulting in the ageing of cocoa trees.\u201d<\/p>\n<p>Adding to the mix, what started as a supply-side problem has got even worse now as speculation in the futures market pushes cocoa prices even higher.<\/p>\n<p>\u201cNon-commercial investors now hold over 60% of total open interest across cocoa futures and options in the New York market, which is an historical high,\u201d said J.P Morgan.<\/p>\n<p>\u00a0<\/p>\n<h2>Prices will rise more<\/h2>\n<p>For consumers like us, the upshot to all this is that we\u2019ll be paying more for our chocolates, which will also come in smaller sizes.<\/p>\n<p>And even if prices come down a bit, experts believe they\u2019re probably going to stay up there for a good while yet.<\/p>\n<p>This is because chocolate companies often lock in prices and stash away cocoa supplies way ahead of time.<\/p>\n<p>So, even though we are seeing new record-high futures right now, the full effect on what you see on store shelves hasn\u2019t kicked in just yet because we are still at the old prices.<\/p>\n<p>\u201cOver the next year or two, they [chocolate companies] will probably pass on more cocoa inflation, and consumers will see higher prices for their chocolate as a result,\u201d said J.P. Morgan.<\/p>\n<p>\u00a0<\/p>\n<h2>Where can I trade cocoa?<\/h2>\n<p>Cocoa futures are primarily traded on two major commodity exchanges: the <strong>Intercontinental Exchange (ICE) in New York<\/strong>, and the <strong>London International Financial Futures and Options Exchange (LIFFE).<\/strong><\/p>\n<p>Can Aussies trade these contracts?<\/p>\n<p>Yes, you basically need to find a trading platform that offers access to US and London markets.<\/p>\n<p>Then you need to decide if you will trade the actual cocoa futures or if you will use a derivate such as a CFD (contract for difference).<\/p>\n<p><em><strong>For more on CFDs read here: <a href=\"https:\/\/stockhead.com.au\/experts\/contracts-for-difference-cfd-the-ultimate-users-guide-for-the-modern-trader\/\">Contracts for Difference (CFD): The ultimate user\u2019s guide for the modern trade<\/a><\/strong><\/em><\/p>\n<p>Online brokers like <em>FXCM, Avatrade, IC Markets and CMC Markets<\/em> should allow you to trade those contracts.<\/p>\n<p>\u00a0<\/p>\n<h2>What about cocoa stocks and ETFs?<\/h2>\n<p>Unfortunately on the ASX, the only ETF that invested in cocoa, the<strong> BetaShares Commodities Basket ETF Currency Hedged (ASX:QCB)<\/strong>, was delisted in 2021.<\/p>\n<p>That ETF held positions in a whole bunch of soft commodities like cocoa, corn, wheat, soybeans and sugar.<\/p>\n<p>So for those still interested in getting exposure to the cocoa market through stocks or ETFs, your best bet is to go to the US and European markets.<\/p>\n<p><strong>Nestle (SWX: NESN)<\/strong>, <strong>Hershey (NYSE: HSY)<\/strong> and <strong>Mondelez International (NASDAQ: MDLZ)<\/strong> are three major stocks you can trade on those markets.<\/p>\n<p>Surprisingly, there are no cocoa-focused ETFs listed in the US. The last one to offer that was the <strong>iPath Bloomberg Cocoa Subindex Total Return ETN (NYSE:NIB)<\/strong>, but it got delisted in June 2023.<\/p>\n<p>There is one cocoa ETF in London however, which is the\u00a0<strong>WisdomTree Cocoa ETF (LSE:COCO)<\/strong>.<\/p>\n<p>The COCO ETF tracks the <em>Bloomberg Cocoa Subindex<\/em>, and provides investors with a synthetic exposure to the price of cocoa.<\/p>\n<p><span class=\"et_bloom_bottom_trigger\"><\/span><\/p>\n<p>The post <a href=\"https:\/\/stockhead.com.au\/food-agriculture\/chocolates-may-soon-be-luxuries-as-cocoa-prices-surge-and-how-investors-can-take-advantage-of-this\/\">Chocolates may soon be luxuries as cocoa prices surge; and how investors can take advantage of this<\/a> appeared first on <a href=\"https:\/\/stockhead.com.au\/\">Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"<p>Cocoa prices have skyrocketed recently Consumers are likely to feel the pinch with higher chocolate prices and smaller servings So how do I get exposure <a href=\"https:\/\/economicherald.net\/?p=9945\" class=\"read-more-link\">[more&#8230;]<\/a><\/p>\n","protected":false},"author":0,"featured_media":9946,"comment_status":"","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-9945","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Chocolates may soon be luxuries as cocoa prices surge; 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