Cocoa price analysis

Among the most traded food commodities in the world, cocoa is in a very good position. The daily trading volumes in this commodity are such that the cocoa market offers great liquidity and can be traded, whether through derivatives such as CFDs or by buying shares in companies involved in cocoa production. Here you will find all the essential information you need for an effective analysis of cocoa as well as some tips on the indicators you should use to do so.  

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Cocoa price analysis

Elements that can influence the price of this asset:

Analysis N°1

The demand, which essentially depends on the purchasing power of the consumers in the industrialised countries. However this data has relatively little impact on the price.

Analysis N°2

Production conditions: This can relate to particular meteorological conditions or geopolitical tensions concerning the cacao producing countries.

Analysis N°3

The prices of other agricultural commodities can also influence that of cacao which can be considered as one of the refuge investments in this sector. When the prices of other products in this sector fall investors can sell their positions to invest in cacao.

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76.4% of retail investor accounts lose money when trading CFDs with this provider.

General presentation of cacao:

Everyone has heard of cacao, the principal ingredient in chocolate, which is consumed throughout the world. But cacao is also used in the production of other alimentary products.

Cacao is mostly traded on the markets in the form of raw cacao beans and over 70% of the global cacao production is from western Africa, particularly the Ivory Coast which produces 43% and Ghana which produces 21%.

The remainder of the global cacao bean production is from South America, particularly Brazil, with some from Indonesia.

It is interesting to note that the cacao is generally exported from the producing countries in its raw form, as cacao beans, to the consumer countries. Once they arrive at their destination in the industrialised countries the beans are ground and processed.

The countries that consume the majority of the cacao are European, the North American countries of the United States and Canada are also major consumers as is Japan.  


Useful information about Cacao on the stock markets:

Cacao is grown and then sold in the form of beans on the international markets. Its production is mostly achieved in Western Africa which produces over 70% of the total global cacao. More specifically it is the Ivory Coast and Ghana that are the greatest current cacao producing countries. Most of the remaining production is from Brazil and Indonesia.

The cacao beans are exported and traded in their raw form. It is the importers who then grind and process the cacao beans. The countries and geographical areas that import the highest amount of cacao beans are actually Europe, North America and Japan.


The cocoa financial markets:

As with all stock market assets, cocoa is quoted on a market. Concerning the physical exchange and term contracts, it is the London Stock Exchange LIFFE (London International Financial Futures and Options Exchange) who is responsible for its regulation. This market itself belongs to the American and European stock market NYSE-Euronext.

However cocoa is also traded on the American NYBOT market (New York Board of Trade) that generates more than 3 million transactions each year on the contracts for tons of cocoa.

Due to these different international markets it is possible to trade in cocoa from many countries throughout the world.


The rates of cocoa:

Investment in cocoa is highly sought after as the world demand for this commodity is constantly increasing every year with a growth rate of 2.5% average. In fact this is the case for an increasing number of food commodities; the cocoa production is demonstrating a major decline and no longer responds to the demand.

Therefore, the cocoa rates have followed a major rising trend since 2005 and continue to attract investors despite a slight fall over the markets in 2008 due to the economic crisis.

It is due to the increasing tensions relating to production in the Ivory Coast that the cocoa rates finally rebounded in 2009 after a major increase in points of 65% over a year and a rate that rose to 2,000 pounds sterling at the end of January 2009.


Historical analysis of the price of cacao:

It is very interesting to study a historical analysis of the cacao price over the last few years. The NYMEX stock market charts in fact display strong variations in the price of this agricultural commodity over the short and the long term.

We also note that the price of cacao has followed a long term rising trend since March 2013 which has been evenly interspersed with slight corrective decreases in the price. On the other hand, the volatility of this raw material makes it possible to detect many opportunities in the short, medium or long term.


Why is the price of chocolate rising fast?

The main reason for the current rise in the price of chocolate is of course the gap that is widening between supply (which is consistently decreasing) and demand, which remains stable. The demand even has a tendency to increase due to the emerging countries which are consuming more cacao.

Concurrently, due to plantations that are not maintained and problems relating to climate, production is having trouble keeping pace with demand, even more so as certain other basic agricultural products such as palm oil are more profitable at present for the agricultural community. 

It is for these reasons that many investors are interested in this raw material with both a short and long term strategy and trade it on the stock market.


The stock market products used for investing in chocolate:

It is possible to trade in chocolate in several different ways as a stock market asset for example through the use of derived products such as certain ETFs or ETCs that follow the movements of the cacao index. Numerous Forex brokers also offer their clients the opportunity to invest in chocolate using CFDs by speculating on the rise or fall of the underlying asset price.

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Trade in the cacao now!
76.4% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.