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Cocoa prices are soaring and are sitting at a multi-decade high as concerns about supply and demand dynamics continued. Prices peaked at a high of $3,420 this month, bringing the year-to-date gains to more than 33%.
Supply deficit to continue
The agricultural sector is bracing for a difficult year as climate change continues. Europe is going through a major heat wave while the El Nino phenomenon is underway. As a result, some agricultural commodities like cocoa and orange juices have roared to the highest levels in years.
Cocoa price has soared because of the rising demand and falling supplies. Demand for chocolate has risen as the world has reopened from the Covid-19 lockdowns. This demand will likely continue rising as the world population jumps.
On the other hand, there are concerns about supply as many of the leading suppliers see low production, as I wrote here. Analysts believe that the world will see another year of supply deficit. A recent study by the International Cocoa Organisation (ICO) showed that the deficit will jump to over 142k tons.
The main reason for this is that Ivory Coast has seen wet conditions and flooding, which has led to rotting and disease. This is important because Ivory Coast is the biggest producer of cocoa with a 40% market share.
The rising cocoa prices will have an impact on chocolate companies like Mondelez and Hershey. While these companies are set to hike prices, there is a likelihood that more people will stay away from chocolate bars.
It is worth noting that these companies are still highly profitable. Mondelez’s revenue jumped from $7.7 billion in Q1 of 2022 to $9.16 billion in Q2’23. Its profits jumped from $855 million to over $2 billion. Similarly, Hershey’s revenue rose from $2.6 billion to $2.98 billion while its profit soared to $587 million.
Watch here: https://www.youtube.com/embed/i685uH_jLsA?feature=oembedCocoa prices forecast
The daily chart shows that cocoa prices have been in a strong bullish trend in the past few months. This rally has been supported by the 50-day moving averages, signaling that buyers are in control.
The Relative Strength Index (RSI) moved slightly below the overbought level. Further, the MACD indicator has moved above the neutral point. Therefore, there is a possibility that cocoa will likely continue rising in the coming months. If this happens, the next level to watch will be at $3,500.
The post Cocoa prices surge continues as Mondelez, Hershey profits jump appeared first on Invezz.
