A Detailed Look at Cocoa Futures Market Analysis for 2020

A Detailed Look at Cocoa Futures Market Analysis for 2020

Cocoa has been called the “food of the Gods” by many cultures. In the US, the product has become an increasingly attractive commodity for investors. In this detailed cocoa futures market analysis, we will take a look at expert predictions and speculations so you can decide whether the market is suited for your investment preference.

There are various reasons why investors buy agricultural commodities, such as cocoa. Some of the major reasons are:

  • Speculation on cocoa price
  • Forecast of growing demand
  • Diversification of investment portfolio

How well can you speculate on the price of Cocoa?

A few countries in the West African region are major producers of cocoa. The weather and local politics are two of the most significant factors that influence the production of the plant and removing bottlenecks in the extensive supply chain.

Experts recommend being careful when investing in cocoa as its price can become volatile without much warning. However, investors who prefer to speculate on short-term supply deficit consider cocoa an attractive commodity to invest.

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How good is the growing demand for investment in Cocoa?

Market analysis of the cocoa industry shows several reasons that are making experts predict strong growth in demand for cocoa supply in the US in the coming years.

Some of the main reasons for this prediction are:

  • Chocolate is getting more popular – As countries with emerging cocoa markets are getting richer, there is a significant trend of adopting Western dietary customs. This is making chocolate, which was earlier a luxury item in these markets, to become part of their regular diet and resulting in great demand for cocoa in these countries.
  • Dark chocolate is becoming a health food – Dark chocolate is rich in antioxidants, which makes it excellent for lowering the cholesterol levels in the body and several studies have even shown its benefit to curb the growth of cancers. As increasing numbers of consumers worldwide becoming aware of the immense benefits of dark chocolate, its demand expected to grow immensely.
  • Western countries are demanding more chocolate – The health benefits associated with dark chocolate as well as its growing popularity as a luxurious sweet item, the consumption of dark chocolate in Western countries has been noticeable from the past few years. In addition, as the market in these countries is on a steady rise, the growth in demand for dark chocolate in North America and Europe is expected to raise the price of cocoa even higher.

Is investment in Cocoa a better way to diversify your portfolio?

Investment in cocoa products seen as an excellent way for investors to diversify their portfolio. As the product is loosely related to other financial assets, it offers excellent protection during periods of inflation.

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Should you invest in Cocoa?

Cocoa is a slightly high-risk but big-gains commodity. Cocoa prices tend to be volatile and could result in big losses or big gains.

Investment in cocoa is more than a simple speculation game when it comes to forecasting supply bottlenecks. Investment in cocoa is advisable if you want to diversify the assets in your investment portfolio and keep away from financial commodities but want to retain assets in commodities.

According to cocoa futures market analysis, collective investment in soft commodities, which includes cocoa could lower the overall risk of losses for your investment portfolio and provide security in times of inflation.

In addition, 3 long-term aspects invest cocoa highly profitable:

  1. Cocoa futures market analysis shows a growing wealth of emerging cocoa-producing countries expected to bolster cocoa production significantly.
  2. The trend of global warming expected to eventually affect the supply chain as it could damage long-term production from cocoa trees.
  3. Increasing health consciousness among consumers set to increase demand for dark chocolate in the buyer’s market in the coming years. Chocolate considered to be a unique luxurious health food in Western countries today.

Cocoa traders should also take into account the risks involved in investing, such as:

  • Growing concerns regarding obesity could adversely affect the growing demand graph. Despite being listed as healthy food, dark chocolate has a high-fat content. Whereas milk (light) chocolate is high in sugar and fat.
  • A more strong pound value has the potential to lower the price of cocoa in several production markets.
  • Over-supply of cocoa could have an adverse effect on cocoa prices. If West African cocoa-producing countries do not achieve political stability soon. And are not able to upgrade their production facility. There could be a significant increase in production and supply of cocoa which would result in a drop in its prices.
  • Cocoa is still considered a volatile commodity whose prices could get lowered without any indication or catalyst.

In conclusion, experts advise being careful while investing in cocoa as it is a volatile commodity. And the problems in the production market may lower prices without warning.

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