Cocoa shares some similarities with coffee, with 60 to 70 percent of the global supply coming from two countries — Brazil and Vietnam for coffee and Ivory Coast and Ghana for cocoa. However, this makes it more risky.1)
Politically sensitive, yes. Weather sensitive, probably not. Wheat is produced over a wider geographical area than some other commodities. I think that commodities like coffee and cocoa may be more weather-sensitive. A frost in Brazil can skyrocket prices. Disease in West Africa will send cocoa prices soaring.2)
For both commodities, extreme weather and shortages fueled rallies. And, like cocoa, coffee production is concentrated in two countries. Soaring prices have also squeezed traders and forced them out of the market.3)
A bag weighs 60 kilograms.
Arabica's coffee premium to robusta dropped to around US$661/t on Friday (the lowest since May 2019) amid diverging fundamentals between the two types of coffee. There are expectations that the arabica harvest will encounter a supply surplus while robusta coffee will see a fourth consecutive year of deficit for the 2024/25 season. Recent reports suggest that upcoming dry EI-Nino weather conditions in Southeast Asian countries have raised concerns about robusta coffee harvest.4)
But as Bloomberg Opinion’s Javier Blas argues, left unsaid is a notable development that’s reshaping the coffee market: China is now developing a strong taste for the beverage, heralding an era when prices probably will be higher for longer than in the past.5)