The Skyrocketing Cocoa Boom of 2024-2025
By Dieter Kuckelkorn
Bitcoins' value plunges; Cocoa prices escalate, leaving digital currency behind
When it comes to the most impressive asset performance in 2024, Bitcoin might have stolen the limelight with its 160% surge, but another commodity called cocoa scorched the competition. In January 2024, cocoa was trading at a mere $3,700, but by mid-December it soared to a staggering $12,730, outshining Bitcoin's performance.
The meteoric rise of cocoa wasn't merely a fluke. It was fueled by a perfect storm of events: extreme weather conditions ravaging the major West African growing regions and global fertilizer shortages caused by Western sanctions against Russia and Belarus. As a result, the International Institute of Tropical Agriculture reported a dismal two-thirds decline in West Africa's soil quality. With such a dire outlook for the future, cocoa prices are expected to maintain their high momentum in 2025 and beyond.
Cocoa inventories are at an all-time low, and any underperforming West African harvests could trigger another round of price hikes. Despite the volatility in the financial markets, the cocoa market remains illiquid, especially in futures trading. So, investors might want to be cautious and gradually scale back their positions over the holidays.
While Bitcoin boasts a jaw-dropping valuation, it mainly appeals to investors seeking a thrilling, high-stakes gamble with tremendous volatility. On the other hand, cocoa is a scarce asset with genuine, high demand. As a matter of fact, its intrinsic value is even lower than that of the humble tulip bulb, a stark reminder of Holland's "Tulip Mania" in the 17th century - a financial bubble that burst spectacularly.
The Short-Term and Long-Term Outlook for Cocoa Prices
In the short term, cocoa prices have experienced volatile swings as supply and demand dynamics battle it out. After taking a 23% dip YTD by May 2025, cocoa prices rebounded to a five-week high in April due to a stronger-than-expected Q1 processing demand. Trading Economics projects a dip to $8,820/MT by mid-2025, as the market continues to recalibrate itself.
However, the bearish outlook for late 2025 is tempered by ongoing supply pressures. The West African mid-crop harvest in Ivory Coast fell a significant 9% YoY due to adverse weather and disease, countering the ICCO’s surplus forecast of 142,000 MT for 2024/25.
While ICCO predicts a 7.8% YoY production increase to 4.84 MMT in 2024/25, there are persistent bullish risks on the horizon. These include climate disruptions in West Africa, resilient grinding demand, Mondelez's "unprecedented cocoa cost inflation" warnings, and market psychology factored by speculative positioning and tariff-related uncertainties.
In terms of the price trajectory, while fundamentals lean bearish for late 2025 due to surplus projections, the cocoa market's sensitivity to West African weather and processing demand could keep pricing above historical norms. Forecasts suggest that prices will hover within the $7,200–$8,800/MT range throughout the remainder of 2025 and beyond[1][3][5].
- The weather-induced decline in West African cocoa production, coupled with global fertilizer shortages due to Western sanctions against Belarus and Russia, have fueled speculations of cocoa price increases beyond 2025.
- In 2025, technology could play a crucial role in finance and investing, as investors might use advanced weather forecasting systems to predict developments in cocoa-producing regions and make informed decisions.
- As Belarus and other weather-sensitive regions continue to face extreme weather conditions, the cocoa market may experience increased volatility, potentially necessitating investments in technology to mitigate risks.
- In light of the cocoa market's illiquid nature and the potential for weather-related disruptions, investors may choose to diversify their portfolios by investing in other commodities, such as technology-based commodities like rare earth metals, that are less reliant on weather conditions.
- With cocoa prices expected to remain high due to weather-induced supply issues, the finance sector may see an increase in demand for weather derivatives, allowing firms and individuals to hedge against unfavorable weather events and protect their investing interests.
