Cocoa and coffee: Will fluctuations continue?

In March 2024, the COCOA price skyrocketed, spectacularly breaking its ATH. Due to relatively similar factors impacting price changes, traders also look with curiosity on COFFEE. What’s going on in the agricultural commodities market?

Analysis of COCOA and COFFEE

COCOA may have been one of the hottest assets of the first quarter of 2024.

Cocoa – up 190% in just over 3 months.

The price is still above the EMA200 and recently broke below the EMA50, which indicates the current strength of the trend. The Fibo retracements worth watching are 0.618 ($6956), 0.5 ($7862), and 0.382 ($8767), as the price oscillates around them.

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Could we also observe sensational rises in terms of COFFEE?

Coffee – a clear upward trend from October 2023.

Coffee prices are currently near the February 2022 highs – the highest in over 2.5 years. Since the golden cross on the EMA50 and EMA200 in December last year, the price has increased by over 34% and maintains upward momentum with dynamic support at the EMA50. Are new highs ahead?

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Major influence of weather

Changes of climate may not be seen on a daily basis, but there are serious issues for the agricultural industry. It is especially visible in developing countries.

Both cocoa and coffee are agricultural commodities, mainly cropped around the equator. Most recognizable regions known for plantations are located in South Eastern Asia, Western Africa and, obviously, Brazil together with some countries of Latin America.

Cocoa

First months are vital for the cocoa crops throughout the whole year. The weather conditions during winter didn’t help, especially in West African countries, such as Ghana and Cameroon. The combination of irregular rainfall and temperatures exceeding 30 degrees Celsius resulted in drought, smaller yields, and tons of rotten seeds.

The result is pretty obvious – higher demand led to higher prices of cocoa in African countries.

Coffee

The situation of coffee in the market throughout the 2024 seems to be more stable than cocoa. However, traders should keep in mind that there are several types of grains, and some of them are more vulnerable to weather conditions than others.

The perfect example is Robusta. It is a less popular, more intense type of coffee, mostly grown in Vietnam and some other countries in the Middle East and Sub Saharan Africa. Unfortunately, due to the major weather anomalies, crops have been significantly slower compared to the previous years. As a result, Robusta prices have reached over 50% growth since the beginning of the year in the market.

Even so, it doesn’t mean the price of coffee experienced so much growth. Robusta is less popular than Arabica and its crops have been mostly located in Brazil. This country has an immense experience in terms of taking care of its plantations. Even though weather conditions haven’t been favorable throughout the last months, the price of Arabica hasn’t risen as substantially as in terms of Robusta or cocoa.

What’s next?

Traders must pay attention to the weather conditions that impact commodities, especially agricultural ones, more than any other asset. They may be as volatile as cryptocurrencies, so investing in cocoa and coffee have to be carefully considered. These two assets may be a more unpredictable addition to the portfolio.