In 2024, cocoa emerged as the surprising winner in the world of commodities, outperforming bitcoin, the U.S. stock market, and even gold. Experts are predicting that cocoa prices are likely to continue rising due to increasing demand and climate-related challenges. As a result, cocoa has become a very attractive investment opportunity for many investors.
The dramatic rise in cocoa prices during 2024 was unexpected but welcomed by many investors. Prices surged by 185% over the year, with March futures reaching close to $11,960 per metric ton. This significant increase in cocoa prices has put the spotlight on soft commodities as a potentially lucrative investment option for the future.
The outlook for cocoa in 2025 remains positive, with record-high ocean temperatures and dry winds expected to impact cocoa crops and reduce harvest volumes. This is likely to put further strain on supplies, potentially driving prices even higher. However, there are concerns about whether consumer demand for cocoa products will remain strong at these elevated price levels.
The inelastic demand for chocolate, which is made from cocoa, has allowed prices to remain high despite the significant price increase. Chocolate has a universal appeal that has helped support demand, even as prices continue to rise. This has been a key factor in driving up cocoa prices and making it the best-performing commodity of 2024.
The cocoa situation in Africa, a major cocoa-producing region, has also had ripple effects on the currencies of countries like Ghana. Ghana’s currency faced challenges earlier in the year due to its poor cocoa output, highlighting the interconnected nature of global commodity markets and the impact of cocoa price movements on economies around the world.
In addition to cocoa, other soft commodities like coffee and orange juice concentrate have also seen significant price increases in 2024. Coffee prices have surged by over 70% due to adverse dollar predictions and projected output reductions in countries like Brazil and Vietnam. Similarly, orange juice concentrate prices reached historic levels in August, driven by poor harvests caused by citrus greening disease in Brazil and California. These trends suggest that soft commodities as a whole are performing well and could continue to be profitable investments in the future.
