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Cocoa: current price, history, usage, chart

Updated on March 10, 2024

August 8, 2022

Do you like chocolate? And who shouldn’t. You will certainly not be unfamiliar with the information that the main ingredient for chocolate production is cocoa. Cocoa, however, is not just a snack. You can also like it as a trading commodity that you can make money from. How to do it? We will tell you that in this article. Right after we introduce you to cocoa a little. So let’s do it!

Cocoa – properties and uses

When you think of cocoa, you probably think of a brown fine powder that can be found in any store. However, the journey of this delicacy was quite long before it reached the shelves of our stores. It probably came from Africa, where it had to undergo a rather long processing process. Let’s now look at how such cocoa is actually obtained.

Cocoa is a powder that is obtained from cocoa beans. These cocoa beans are actually the seeds found inside the fruits of the cocoa tree. After they are roasted, crushed and ground, the familiar brown powder is created. In its pure form, cocoa has a bitter taste. However, we will certainly know it as one of the main ingredients of sweets.

So it is the food industry where cocoa has found its use. And not only as the main raw material for chocolate production. But also as an ingredient in various doughs. A sweet cocoa drink is also known, which is created by boiling cocoa, sugar and milk. The drink hot chocolate is no less famous. Even she could not exist without cocoa.

Production

Cocoa trees only grow on the equator. This area has the conditions that these plants need. So hot and humid. Therefore, we know cocoa primarily as a product of West Africa . Around 70% of the total cocoa production comes from here. The largest producers from this area include the state of Ivory Coast, Ghana, Nigeria and Cameroon.

However, cocoa exporters can also be found in South America. Above all, Brazil and Ecuador. However, Indonesia is also among the largest producers of cocoa. It belongs together with the Ivory Coast and Ghana among the three largest percentages of cocoa in the world.  

The history of cocoa

Although cocoa is currently produced mainly in West African countries, originally cocoa trees were grown mainly in South America, where they also come from. Allegedly, they could be grown here as early as the 5th century. Later, thanks to the Mayans, Toltecs and Aztecs, cocoa-producing plants also reached the territory of Mexico.

Cacao then reached Europe in the same way as, for example, potatoes. Thanks to the Spanish settlers. They brought it to Europe in the 16th century. And very soon cocoa became a popular drink. However, cocoa trees as such were not systematically named until the 18th century. And that by the well-known Swedish physician and naturalist Carl von Linné.

How to trade cocoa

So, we all know what cocoa actually is. Now let’s move on to how you can trade cocoa as a commodity. And how to make money from this cocoa trading. There are several ways. We will now see how to do it.

Physical cocoa

One way cocoa can be traded is by trading physical cocoa. This is possible on the commodity exchange. This is where cocoa producers trade with those who need to physically own the cocoa. Here, the price of cocoa is given in US dollars per metric ton. These trades can take place through futures contracts. These are future contracts. They are created by two parties agreeing to exchange a predetermined amount of cocoa for a predetermined price on a predetermined date.

And what is the advantage of these futures contracts? This ensures that both parties get a price that suits them. This will insure against a situation where the price of cocoa should rise significantly in the future. Or, on the contrary, to fall. In addition, the producer ensures the sale of his product.

Cocoa CFD trading

But as already said, trading physical cocoa is only for those who need to actually own a certain amount of cocoa. And traders who only want to make money trading cocoa usually don’t want to. The reason is simple. They do not want to deal with cocoa transport and storage. They simply want to correctly estimate the future development of the cocoa price level.

And it is precisely for such traders that trading with CFD contracts is ideal. Or CFD trading. In that case, you are not buying or selling any real physical cocoa. You are only speculating on the future development of the cocoa price level. When trading CFDs, you can profit not only from the rise, but also from the fall in the cocoa price level. This is not possible when trading physical cocoa.

And why CFD trading? It’s simple. When you trade CFD contracts, you enter into a contract with your broker. In this contract, you and your broker agree to pay each other the difference between the purchase price and the sale price of the cocoa. Whether you pay the broker, or he pays you, will depend only on whether you correctly estimated the development of the cocoa price level.

If, based on market research, you find that according to your assumptions, the price of cocoa should rise in the near future, then you enter a buying position, i.e. a long (long) position. If, based on your research, the value of cocoa should go down on the contrary, then you enter a short position. In other words, into a short (short) position.

How to begin?

Starting a cocoa business is not a science. Basically, this is the same type of trading as any other commodity. If we assume that you are a small trader who does not need to actually own cocoa for your investments, then you will surely be more comfortable with CFD trading. And then you just need to look for a CFD broker that allows you to trade cocoa.

You will find many of them on the web. So there will certainly be no shortage of such online brokers. And how to choose the right one among them? It is good to find out all the necessary information about these brokers first. And do not save on studying reviews of other traders. Each broker will offer you slightly different conditions for trading. And in addition, you can easily find fraudulent brokers among them.

When you find the right broker, then definitely don’t start trading right away. Today’s trend of online brokers is that they offer a demo account. This is a trial account. After registration, you will be credited with a certain amount of virtual money, which you can use for trading. That is, practice trading. Everything on this account is “just like”. But the good thing is that you can familiarize yourself with the trading platform in advance and you will know in advance what you are getting into.

In addition, with this trial trading, you will be able to test how successful you are in your estimations. So you will have plenty of time to familiarize yourself with  fundamental and technical analysis . And also to be able to follow the current trends in the market. Education is not worth underestimating in trading.

Beware of risks

And why should all your estimates be backed up by thorough market research? Because CFD trading also presents certain risks. Probably the biggest risk of CFD trading is financial leverage. It can multiply your profit several times. But also a loss. So trading CFDs can make you a quick profit. On the other hand, it is possible that you will lose your invested money. Therefore, do not underestimate the preparation.

Cocoa and stocks

But there is another way you can invest in this commodity. It is trading in shares of companies that deal with cocoa processing. Examples of such companies can be the well-known Nestlé corporation. And just like trading cocoa itself, there are two ways to trade shares of such companies. You already know the first one well based on the above. These are financial derivatives of the CFD type.

And the second way is again trading physical shares. If you buy classic shares of companies that process cocoa, then you become their shareholder. This entitles you to enjoy the benefits of owning the shares. On the one hand, it can be a right to a dividend. If your chosen company will pay it. And another advantage can also be the right to vote in the general meeting. In this way, you can indirectly influence the future development of the given company.

What affects the price of cocoa

In the following part of the review, we will look at the factors that you should especially watch. That is, if you are going to trade cocoa. We will reveal the indicators that could directly influence the future development of the price of cocoa.

Let’s start with the weather. The cocoa tree is an agricultural commodity. So how big the crop will be will of course depend on whether the cocoa bean producing plants have the right conditions. For example, if temperatures drop below 15 degrees or the amount of precipitation is too high, this may not mean anything good for the crop.

The time of harvest also affects the price of cocoa. It takes place twice a year for cocoa farmers. Specifically in spring and summer. At this time, supply meets demand. And therefore the price of cocoa is usually lower during this period. However, the highest price of cocoa usually comes in winter. In the winter, i.e. before the harvest, cocoa stocks gradually thin out.

Another factor influencing the development of cocoa prices is the current political and economic situation. And given that the vast majority of world production is exported from countries with political instability, this indicator is important to monitor. For example, export restrictions or sanctions could significantly affect the value of cocoa.

Cocoa – current online chart

On the graph you can see how the price of cocoa has developed over time. You can notice quite regular curves here in each year. This is due to the regular development of the cocoa price before and after the harvest.

Development of interest in the commodity

How is the demand for cocoa developing? The demand for cocoa continues to grow year after year. But it is not an expensive metal, the supply of which would continue to dwindle. On the contrary, along with the demand for cocoa, its production is also growing. Therefore, the value of cocoa does not fundamentally increase in the long term.

Cocoa – Summary

Now you know everything there is to know about cocoa. Among other things, how you can trade with this commodity. Remember that success favors the prepared. Therefore, do not underestimate the regular monitoring of current market events. Moreover, as part of the regular fluctuations in the price of cocoa throughout the year, it is quite possible to plan the time when it is ideal to enter the trade. And when, on the contrary, to leave it.

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