Hot Chocolate
Cocoa has been hot recently: prices have already more than doubled since the beginning of 2024 (up 250% in the last year), making the metric tonne more expensive than copper.
As a chocolate gourmet, my initial reaction is concern, nay outright worry that I may get priced out of the volume of dark chocolate required for my daily fix.
The main reasons for the rally are 1) crop shortfalls in Western Africa, the most important cocoa producing region in the world and, 2) the fact that cocoa is not a plantation business, meaning a significant portion of the supply stems from unsophisticated individual farmers, who get hit particularly hard by less than ideal weather conditions.
What to make of it beyond bittersweet dark chocolate? While the above conditions may be relatively unique to cocoa, we seem to be in the segment of the economic cycle where commodities prices, which have long stagnated (or at least not benefited from asset price inflation to the same degree), are poised to go higher, simply because demand remains very strong.
This means that inflation is very likely here to stay and this decade may see echoes of the highly inflationary 1970s.
