Raw materials

The cocoa super-run on the stock exchange, now worth even more than copper

Posted by MoneyController on 28.03.2024

The rise in cocoa prices seems to be unstoppable. But why is this commodity growing at such an incredible rate?

The extraordinary cocoa rally

The rise in cocoa prices continues, and cocoa is now worth more than copper. Not only that, the commodity in question is growing faster than bitcoin and, as Sissi Bellomo points out in Il Sole 24 Ore, has even outperformed Nvidia's rally this year. A few figures: a tonne of cocoa used to cost an average of $2,500. Today, it costs more than $10,000. Copper, a metal widely used in industry and with growing applications in energy transition technology, is now worth around $8,800 a tonne.

Falling supply behind rising prices

There are at least two reasons for the rise in cocoa prices: firstly, the world's largest producers are in West Africa (Côte d'Ivoire and Ghana, for example), where weather phenomena have destroyed much of the crop and encouraged the spread of disease among the plants; and secondly, the blockades of the Suez Canal, which are preventing imports from other producers in South-East Asia. A third reason, as reported in 'Il Sole 24 Ore', is Europe's deforestation regulations, which limit the pool of potential suppliers.

Technical analysis and futures

In addition to these reasons, Bellomo reports on a Bloomberg analysis of cocoa from a technical point of view: for the past two months, cocoa has been considered "overbought", ready to fall. But this has not happened. According to Bellomo, who also quotes some thoughts from Paul Joules, commodities analyst at Rabobank, it is possible that a market dynamic has been triggered in terms of buying and selling futures (some to protect themselves from rises, others to secure supplies on the financial markets): the result would be precisely this rise in cocoa prices, which shows no sign of stopping.

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