How to Invest in Cocoa
Guide for the Savvy Investor Can you imagine the long journey that the sapid delicacies made through such chocolate overture? It is now time to delve into cocoa investment. The charm of niche may come to the minds of some about cocoa investment. Cocoa can be very lucrative and also very satisfying.
The global chocolate sector that cocoas stand for is worth $130 billion, so there is money to be made from cocoa beans-the little things? Cocoa is the single most significant key ingredient to anything chocolate. The tiny little beans affect just about all of our favourite snack foods, from your hot cocoa in the morning to that dark chocolate bar that just melts in your mouth.
Cocoa, apart from food, has established itself as an investor’s popular commodity. Of course, investors can buy and sell cocoa as they do for gold or oil.
Investing in commodities is certainly not a beginner’s game. One must understand global markets and some pretty intricate economic principles involved. Still, if you are going for it and wish to diversify your portfolio, cocoa investments present themselves well.
Understanding the Cocoa Market
The cocoa market is one extremely interesting commodity market. Have you ever wondered what brings this market about? Well, a cocktail of weather patterns in the major cocoa-producing countries, political stability, and the global demand for chocolate does the work.
But a major factor still remains; cocoa production is heavily concentrated in a few countries. More than half of the cocoa production in the world is produced in the Ivory Coast and Ghana! Disruptions related to these countries can markedly influence prices globally. Guide for the Savvy Investor
Ghana entered drought and had poor crop yields in 2016.
This led to a flare-up in cocoa prices that year. It shows how these top-producing countries affect the wider market.
Below is a table of the top producers (World Atlas data):
Country: Some Percentage of Global Production
Ivory Coast: 30%
Ghana: 20%
Indonesia: 17%
While we cannot ignore demand for our purposes, we would also observe that, as every chocolate lover knows, over half of world consumption is in Europe. New markets like China and India are also developing quite a craving, which could contribute great momentum for future demand.
Yet investing requires more than just observing supply and demand trends; it also means understanding what grading standard for products has been set by bodies such as the International Cocoa Organization (ICCO). These grades lay the trading quality benchmarks that immediately affect pricing.
So, if you’re bringing cocoa in perspective for investment, you must:
Studied supply-side factors like weather patterns in the Ivory Coast or political happenings in Ghana
Understand consumer trends across various geographies
Know international trading standards
Armed with this information, you will come to appreciate this complex and fascinating commodity market! Go put your shoulder into the study because knowledge is indeed power in a successful investment.
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