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Cocoa prices have risen above copper just before Easter

I come from a country that practically lives off chocolate – Switzerland. To be fair, everything is expensive here, so I think it will take some time before we feel the pinch. Nonetheless, this is crazy, and all this just before Easter.

I feel like chocolate has become the new gold. It’s certainly more interesting than Bitcoin, which is not physical or pleasurable to eat. Sooner or later, private clients will be asking their bankers to stick it in the vaults.

Okay, that’s a delicious exaggeration. But it does beg the question, what’s happening?

Right! So it’s all to do with the futures market. Cocoa futures soared past an unprecedented $10,000 per metric tonne the other day, marking a historic surge that has seen prices double this year.

The reason apparently is due to supply shortages, particularly in key West African regions, which have fuelled concerns of a third consecutive annual deficit of cocoa globally.

But this is not entirely true. This is what the market perceives because chocolate factories have constructed their supply chains to rely on cocoa from West Africa. There is plenty of cocoa grown in places like Brazil and Ecuador. In fact, it grows extremely well in those countries. I know this personally because my father-in-law grows it.

However, supply chains take time to divert, and you need a crisis to make this happen. We are not fully there yet, but perhaps we will be soon. The good news is that if this leads to chocolate companies diversifying their supply of cocoa in the future, this could actually bring stabler prices in the future.

Source: Bloomberg

Coming up:

• Foreign central banks are transitioning towards gold

• Trade between US companies and China continues to fall

• The US is experiencing the most unaffordable housing market since 1984

• US small-caps suffer worst run against larger stocks in over 20 years

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