Why invest in cocoa & chocolate? Fluctuating prices offer opportunities in the market right now, is investing difficult?
The cocoa market is characterized by its fluctuating prices. Important reasons for this are the vulnerability of the cocoa tree and the political and economic conditions of the countries in which cocoa is produced. A cocoa tree is demanding and needs a lot of sunshine. Temperature, precipitation and soil fertility must be optimal. A cockroach plague or drought can be disastrous. Harvests are very variable, which of course causes the price to fluctuate.
- 70% of the total cocoa production takes place in (West)-Africa. The political climate in these countries can influence the cocoa price considerably. The civil war in Côte d’Ivoire, for example, caused the cocoa price to rise sharply in 2011. It is also not exceptional for cocoa farmers to build up huge stocks of cocoa in anticipation of rising prices in order to sell it. Factors like these make the cocoa market less predictable.
- The considerable fluctuations in price make investing in cocoa risky, but also attractive. Correct timing is everything. So keep a close eye on local news and weather forecasts. If you step in at a time when prices are falling, it’s waiting for a bad harvest to emerge and you can cash in. One is a loss, the other is a profit.
Cocoa is getting more and more popular
Cocoa is a raw material for which, just like coffee and sugar, there is a long-term demand. It is a luxury product and unprecedentedly popular in Western countries. The average European eats almost 5 kilos of chocolate a year to give just one example. Asia and Africa are following this development. The demand for cocoa from these continents will increase enormously in the future while production is expected to remain the same or decrease. Scarcity may ultimately be the result, which will cause prices to rise. Source: Corredor de bolsa en Mexico at C-TradeAlert.MX
Many African countries are struggling with socio-economic and climatic problems. Think of high unemployment, corruption and extreme weather conditions. The demand for cocoa continues to rise, as does the pressure on the climate. Sustainable investment is becoming more important every year and, let’s be honest, pure necessity. When you invest in companies that produce their cocoa in a sustainable way with good working conditions, this is not only fun for your own wallet, but you also contribute to society in a positive way.