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Why chocolate is hot this Easter
If you want to know why the price of your Easter Egg may leave a sour taste, have a look at the sweet returns in the cocoa market. Saxo Bank’s Head of Commodity Strategy, Ole Hansen, has been looking into global cocoa trading, which is at its highest level for two and half years, boosted by expectations of a market deficit for the second year running. After finding a floor above $2000 per tonne last March the price has risen by fifty percent up to the current level at around $3000 per tonne.
The world relies on just three countries for the bulk of global supply: Ivory coast, Ghana and Indonesia, between them they account for roughly three quarters of global production. There’s a much broader demand, traditionally Europe consumes most of the cocoa produced, however growing middle classes in emerging markets are also acquiring a taste for chocolate, often sold as a luxury gift.
Longer term: High prices are needed to ensure a continued rise in production to meet rising global demand not least from the rising middle class in emerging countries.
Short term: Cocoa currently range bound between $3030 and $2910 per tonne. The speculative position held by hedge funds touched a record high back in February.
The crop is weather dependent and at risk from extreme conditions. The El Ninó event, forecast for later this year, could skew the commodity price risk to the upside.
Suitably, given it's Easter time, April is the only month which has shown a positive return in all of the past five years, averaging a return of 6.4 percent.
01:45 minutes
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