The cocoa market has made headlines globally as it claims the title of "Commodity of the Year" for 2024, having delivered extraordinary performance and remarkable price surges. With futures on the ICEUS reaching unprecedented highs, cocoa outperformed even trending assets like Bitcoin. The surge can be attributed to various factors affecting global trade, including adverse climate conditions impacting supply and steady demand resilient to rising costs.
Throughout 2024, cocoa futures have skyrocketed, expected to close the year with about 180% increase at ICEUS. Yet, the production faced major hurdles, resulting in projected global deficits of 478,000 tons as reported by the International Cocoa Organization (ICO). Key cocoa-producing nations, Ivory Coast and Ghana—responsible for roughly 60% of global supply—have been significantly affected by unfavorable weather patterns, witnessing excessive rainfall, harsh dust-laden Harmattan winds, and outbreaks of crop diseases.
Notably, the plant disease, Cocoa Swollen Shoot Virus Disease (CSSVD), has hit Ivorian plantations hard, causing yields to dip by 25-30%. This reduction contributed to a 13.1% decline in global production and marked a 26.8% drop in end-season stockpiles, intensifying price volatility and pressure. Despite rising costs, the global consumption of cocoa remains steadfast. Consumers are increasingly inclined toward high-quality products, such as premium and organic chocolate, showcasing remarkable resilience even with food inflation looming large.
On the supply side, the situation remains precarious due to the influence of climate events. Conditions like La Niña may impact future harvests negatively, maintaining elevated pressure on prices. Meanwhile, global stock levels have plunged to their lowest points in 19 years, particularly within New York warehouses, coupled with an 80% drop observed in London markets. These indicators signal a market currently vulnerable to additional supply shocks.
From a technical perspective, cocoa futures have displayed impressive performance throughout 2024, recording significant increases bolstered by fundamental factors such as persistent demand and supply deficits. Analyzing weekly cocoa futures shows a markedly bullish trend with technical analysis outlining supportive graphical aspects observed since the relative lows of October 2022. Rising trends have been confirmed alongside the formation of symmetrical triangle patterns, indicative of consolidation within strong upward movements.
Recent high prices reached $12,931/tonne, with forecasts indicating potential gains leading to uncharted price territories. Attention from investors continues as market dynamics solidify, but caution is advised due to overbought signals and declining trading volumes. Current market observations suggest potential solid foundational support under the bullish structure of cocoa, yet the exceptional 2024 performance also raises red flags for possible consolidation phases.
The consistent rise of cocoa futures may dictate the outlook of future price movements within the commodity market, and experts alert the need for balancing increasing demand with sustainable production practices. Calls for investments in advanced agricultural technologies, plantation regeneration initiatives, and farmer assistance programs are viewed as urgent necessities to confront the prevailing challenges.
The market seems set on walking the fine line between high consumer demand for cocoa products and the production hurdles induced by erratic climatic conditions. With cocoa establishing its dominance as the commodity of the year, eyes remain closely tuned to how these factors will evolve, and their potential repercussions on pricing and supply stability.
