Cocoa beans are the primary ingredient in the chocolate confectionery enjoyed by people worldwide. Cocoa beans require a tropical climate and tend to thrive in countries close to the equator. The West African nations of the Ivory Coast and Ghana produce over 60% of the world’s supplies each year.
For many years, London has been the international hub for cocoa trading. Therefore, the many physical contracts use the British pound as a pricing mechanism, making the price sensitive to the pound’s value against other world currencies. Meanwhile, cocoa trades on the Intercontinental Exchange, and the price is in US dollars.
In 2020, cocoa’s price hit a high of just below $3000 per ton in February. The price of nearby ICE futures fell below the $2140 in July. Since then, cocoa futures have been recovering. The iPath Bloomberg Cocoa Subindex Total Return ETN product (NIB) follows the price of cocoa futures higher and lower.
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