Extreme geographic concentration
Côte d'Ivoire and Ghana between them grow roughly 60% of the world's cocoa, largely on smallholdings of a few hectares. Both governments set a fixed farmgate price for the season in advance and sell the crop forward, which insulates farmers from price swings but also means they capture little of a rally.
That structure is why the market can dislocate so violently. When a price signal cannot reach the growers, supply cannot respond to it.
The 2023–24 squeeze
A combination of dry El Niño weather, black pod disease and swollen shoot virus hit West African output across consecutive seasons. Because the crop had already been forward-sold at fixed prices, origin exporters could not deliver, and the shortfall landed entirely on the exchange market. London and New York cocoa rose to several times their long-run range — the most dramatic move in any major agricultural contract in decades.
It is a clean illustration of a general principle: the smaller and less elastic the tradeable float, the more violent the price move needed to clear it.
Downstream
Chocolate manufacturers hedge years ahead, which is why retail chocolate prices lag cocoa by a long way and then, as hedges roll off, adjust in steps — usually through shrinking bar sizes before headline prices move.
How you would actually trade it
This is a professional market with limited retail products. Exposure typically comes through soft commodity ETCs or through equity in processors and confectioners — though those firms are hedged, so they are a poor proxy for the underlying.
What goes wrong
- Disease and weather in two adjacent countries drive the entire global market.
- Squeeze risk. Thin deliverable stocks against large open interest can produce disorderly moves and enormous margin calls.
- Political and ethical risk. Child labour and deforestation in the supply chain carry both regulatory and reputational consequences, with EU deforestation rules reshaping trade flows.
This entry describes how a market works. It is not a recommendation, a price forecast, or advice about whether this belongs anywhere near your money. How entries are written.