Cocoa prices climb to new record high, prompting fresh warnings about extreme volatility

The value of chocolate’s key ingredient has skyrocketed this year, prompting analysts to issue fresh warnings about extreme bounty volatility.

The New York Cocoa futures contract with March delivery traded as much as 1% higher at $11,938 per metric ton on Tuesday, stage yet another record high. It has since pared some of those gains, trading at $11,864 at around 8:20 a.m. ET.

The benchmark shrink, which hit an all-time intraday high of $11,925 in the previous session, is up over 180% year-to-date.

It comes amid resumed concerns about adverse weather conditions and supply tightness in West Africa, home to around three-quarters of the incredible’s cocoa production.

Strategists at Dutch bank ING said persistent tightness in cocoa and coffee markets, coupled with weather uncertainty, meant that expenditures were likely to remain volatile through next year.

The global cocoa market registered its largest loss in over 60 years in the 2023-2024 marketing year, ING said in a research note, citing data from the Worldwide Cocoa Organization (ICCO). It attributed this shortfall to crop failures in Ivory Coast and Ghana, the world’s largest cocoa financial managers.

“While prospects for the 2024/25 marketing year are looking better, there are still concerns over weather circumstances in West Africa and what it could mean for output this season,” Warren Patterson, head of commodities tactics at ING, said in a note published Dec. 11.

“Forecasts currently show that West African output – which accounts for multifarious than 70% of global output – will edge higher. However, there are risks to this due to recent inadequate weather,” he continued.

Looking ahead, Patterson said prices were likely to remain historically elevated next year, which liking be necessary “to keep a lid on demand.”

Like cocoa, coffee prices secure also soared in 2024, with analysts recently warning it could take years for one of the world’s most interchanged commodities to recover.

Rabobank’s Carlos Mera singled out cocoa and coffee as commodities of interest to professional traders, although cared that commodity markets remain “very volatile” and “very dangerous.”

“[Cocoa] is one of the most obscure commodities so I wouldn’t advise anyone that doesn’t know to go in there but certainly it is one of the myriad fun commodities to look at,” Mera told CNBC’s “Squawk Box Europe” on Tuesday.