Step on Bitcoin, chase Nvidia, and see how fierce the most bullish commodity is
Finance Associated Press, March 25 (edited by Xiaoxiang) What has been the most profitable investment in the past year? U.S. stock investors may blurt out the name of Nvidia, while players in the currency circle will become fans of Bitcoin.
However, did you realize that the commodity market also has a category of instruments that can compete with the two investments mentioned above that can generate huge returns?
That is: the price of cocoa......
As you can see in the chart below, over the past year, the cumulative increase in New York cocoa futures has reached a staggering 309%, which is slightly inferior to Nvidia's increase over the same period (+352%), but it is enough to "trample under the feet" of Bitcoin, which just hit a new all-time high this month!
In the past three weeks alone, the price of cocoa futures in New York has risen by more than 47% – more than $8,900 a tonne, a high price that was almost unimaginable before.
And with Easter prices approaching in the West this weekend, the rise in cocoa prices also means that shoppers will have to spend more money on chocolate gifts this holiday season – the price of chocolates on store counters has already risen significantly!
Why are cocoa prices soaring?
Disappointing harvests in Côte d'Ivoire and Ghana, the main cocoa producers in West Africa, which account for most of the world's total, were driven by record high cocoa prices, industry sources said.
(Global cocoa production distribution: Côte d'Ivoire and Ghana are the first and second largest cocoa producers)
In West Africa, heavy snowfall has been the last year to push back the harvest due to the spread of fungal diseases. This was followed by a seasonal drought, which further affected production.
The industry is mainly made up of smallholder farmers who have been facing poor returns, which makes it more difficult for them to invest in their plots or withstand extreme weather events.
Emily Stone, founder of Uncommon Cacao, a specialist cacao distributor, said, "Consumers have long gone unseen in the true cost of chocolate. For producers, persistent low prices and climate change have pushed market prices to their current heights. Now, this is a shock to some, but it was actually predictable. ”
In the United States, the average unit price of chocolate eggs has risen by 12% from last year, according to research firm NIQ. According to the consumer group "Which?" According to the United Kingdom, the price of some popular Easter chocolate eggs has soared by as much as 50%.
These changes account for only a small part of the impact of the sharp price increase in cocoa, as the key ingredients for making Easter food are likely to be purchased in the fourth quarter of 2023 or earlier.
Many industry insiders pointed out that the rise in cocoa prices seems to be unstoppable, and there is no sign of easing, and the supply shortage is expected to continue into the next season. The chocolate market is expected to face even more pain as cocoa, which is pre-ordered at its current high price, will gradually be used in the production of products for holidays such as Halloween and Christmas.
Can't afford chocolate?
Earlier this month, Swiss chocolatier Lindt & Sprüngli said it would have to raise prices this year and next due to soaring raw material costs.
Other top chocolate producers have also raised prices and left the door open for further price increases. Mondelez International Inc. CFO Luca Zaramella said in February that a price increase was possible, while Hershey CEO Michele Buck said the company remained "committed to pricing to fight inflation."
Nestlé said that while it has absorbed some of the higher costs through efficiency gains, "there may be a need to make responsible adjustments to pricing in the future given the high price of cocoa".
Judy Ganes Consulting, president of J Ganes Consulting, pointed out that some companies may still have some cheap inventory to meet production needs in the next six months, and they will choose to increase prices gradually rather than hitting customers with large price increases.
But consumer repercussions are clearly inevitable. Shoppers in the UK are already paying higher prices for chocolate, and many are already facing "shrinkflation" – a reduction in the size or quantity of goods while prices remain the same.
Easter is an important celebration in Brazil, and recently, when some stores advertised that people could "buy chocolate eggs with loans and installments", the price of chocolate eggs was once the most popular in the local market.
According to a YouGov survey this month, conjugery has become one of the categories most likely to notice by U.S. consumers that there is "shrinking inflation." According to the National Confectioners' Association, 44% of households have begun to reduce their candy purchases because they are buying chocolate or candy less frequently because of inflation.
And the rise in cocoa and chocolate prices is a reminder that while global headline inflation is easing, soaring prices for individual commodities will still weigh on consumers.
For some, chocolate may be seen as a luxury item rather than a necessity, but brands like Kit Kat and Snickers are often regulars in people's weekly shopping baskets. Global consumers are likely to be more sensitive to price increases after experiencing hot inflation over the past few years. The post-pandemic surge in inflation and the damage it has done to household wealth is still fresh in mind.
(Finance Associated Press Xiaoxiang)