Sometimes, you come across something and think, wait, that can’t possibly be right! Well, I have got another money maker for you in case you missed it. Throughout the first quarter of 2024, cocoa emerged as the undisputed leader among soft commodities and the entire commodities asset class.
In a Bloomberg article, supply shortages saw cocoa futures surge well past the USD9,000 per ton level on Monday as a record rally that started in early 2023 shows no sign of letting up. Indeed, commodity trading was a bright spot with profits in cocoa and metals for one of our managers. Machine learning, breakout, long-term and momentum styles all gained.
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Chocolate is hot right now, but not just because Easter is coming. It’s down to shortages and soaring prices of main ingredient cocoa, and “everybody is panicking.” That’s how the head of Guan Chong, one of the world’s biggest cocoa processors, summed up the situation in the market right now.
Prices have skyrocketed, setting new records day after day. They’ve already doubled so far this year to exceed $8,500 a ton, and $10,000 looks like a real possibility. The main reason is poor harvests in West Africa, a result of drought and disease but decades of underinvestment and insufficient support for millions of impoverished farmers have contributed too.
Malaysia’s Guan Chong is scouring the world for cocoa and paying premiums to book beans from minor growers amid worries that some sellers in top growers Ivory Coast and Ghana may default on supply contracts. It’s looking to buy from countries such as Ecuador, Peru and Indonesia, CEO Brandon Tay Hoe Lian told Bloomberg News’s Anuradha Raghu.
Surging cocoa prices are prompting candy manufacturers to crank out new products with less of the pricey ingredient, or none at all. So far they’ve passed on higher costs to consumers. But the breakneck rally shows no sign of easing any time soon, and major chocolatier Barry Callebaut has warned that acute cocoa shortages will persist into next season.