The cocoa market to start the year is anticipating supply challenges and rising prices. Uneasy weather conditions, excessive rainfall in key growing regions, mainly West Africa, could significantly impact cocoa production. The presence of black pod disease and swollen shoot virus can magnify possible supply issues.
Continued supply deficits concerns and higher cocoa prices will be an issue in Q1. Côte d’Ivoire and Ghana, the two largest cocoa producers, may see production challenges paired with what we saw at the end of 2022. Supply issues combined with an increase in demand, could lead to us testing all time highs.
Another big story to watch this year is sustainability initiatives, the EU’s deforestation law will be very relevant by the end of 2024. This is expected to impact the cocoa market for years to come. These rules will be in place to ensure that imported cocoa products were not produced on deforested land, influencing production practices and potential costs.
Cocoa futures should be a price leader this year for commodities in general and could be a good buy to start Q1. There are many factors that will dictate the direction of prices, but for now all signs point to an increase in prices and an opportunity for the bulls to enter the market at attractive levels.
Disclaimer: Past performance is not indicative of future returns. Opinions are my own. Profitable trades are not guaranteed.
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