Hot chocolate: The scolding trade of 2024
Cocoa is not a market I tend to track too closely. But I made a mental note to, upon seeing a national grocery chain increase the price of their home brand chocolate by 60%. $4.00 is still not a huge amount to pay for a slab of alleged Belgian dark chocolate. But it tasted much nicer at $2.50.
However, having since seen the raging bull market on cocoa prices this year, I’ll not complain with the 60% hike on nature’s anti-depressant. Cocoa futures have surged 220.5% from January’s low, before doubling in price with a 101.2% rally from the October low following a multi-month rally. And that saw prices accelerate above its falling wedge target before stopping just shy of the 13k level.
An unfortunate combination of factors help explain the surge of cocoa prices
- Supply deficits in major cocoa-producing countries Ghana and Côte d'Ivoire due to disease outbreaks, aging trees and extreme weather conditions exacerbated by El Niño.
- Persistent dry weather in West Africa has lowered yields.
- The availability of cocoa beans were also lower, thanks to EU’s deforestation-free regulations
- Global demand has surged
- All the above helped fuel speculative bets and panic buying from producers, further sending prices surging higher.
Are chocolate drops off the menu?
Not necessarily. But they may be on the small side. We’ve seen a strong rally in December but prices are perhaps a bit extended from their 10-day EMA (exponential moving average). The daily RSI (14) also reached its highest level since March and well within the overbought zone at 86.5.
Note that the 20-day EMA sits near a 38.2% Fibonacci ratio and June high around 10,300, which could make it an ideal for chocolate ‘dip’ buyers to return. And until we see a significant shift in the fundamentals supporting cocoa prices, I could be looking at even higher prices for confectionary in 2025.
How to trade with FOREX.com
Follow these easy steps to start trading with FOREX.com today:
- Open a Forex.com account, or log in if you’re already a customer.
- Search for the pair you want to trade in our award-winning platform.
- Choose your position and size, and your stop and limit levels.
- Place the trade.
StoneX Financial Ltd (trading as "FOREX.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, FOREX.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date.
This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. No opinion given in this material constitutes a recommendation by FOREX.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although FOREX.com is not specifically prevented from dealing before providing this material, FOREX.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. For further details see our full non-independent research disclaimer and quarterly summary.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% 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. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.
FOREX.com is a trading name of StoneX Financial Ltd. StoneX Financial Ltd is a company incorporated in England and Wales with UK Companies House number 05616586 and with its registered office at 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is authorised and regulated by the Financial Conduct Authority in the UK, with FCA Register Number: 446717.
FOREX.com is a trademark of StoneX Financial Ltd. This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy. FOREX.com products and services are not intended for Belgium residents.
© FOREX.COM 2024