Hot cocoa — a hot commodity
Of all the commodity futures contracts, cocoa rang the bell for the greatest price gain of the year. The other breakfast drinks, coffee and OJ, were also sharply higher, but no commodities (we are not including cyber currencies) came close to nearly tripling its price since the end of December 2023.
As of October, the International Cocoa Organization was estimating global cocoa production to be down 14%, creating a deficit of 42,000 tonnes, the largest on record. The Ivory Coast and Ghana, the world’s two largest producers, saw production declines due to El Niño causing dry growing conditions, while pests, diseases and fertilizer shortages contributed to their troubles.
A tonne of cocoa, the main ingredient of the chocolate we will soon be buying for our sweethearts, exploded from $420 at the end of 2023 to $1,185 this week.
The ag community looks back into the future’s crystal ball
Weather and climate change
Droughts, flooding and hurricanes headlined the ag news in the U.S. this year, affecting crops like soybeans and corn in the Midwest and devastating growing areas in the Southeast that cover 2.8% of our gross national profit.
A dry Mediterranean region saw a hot growing season raise olive and olive oil prices, while corn in South America suffered from La Niña-influenced drought. Meanwhile, El Niño’s heavy rains in West Africa brought disease that helped shoot chocolate prices to the sky. Dry weather affected rice production in Italy while monsoons in India reduced their rice crops.
Ag experts worry that continued erratic weather will reduce crop yields, fluctuate prices and increase food security worries.
Disease issues
One of the big ag stories in the U.S. is the H5N1 bird flu that has affected more than 25 million birds. Egg layers as well as turkeys have seen the greatest losses, but up to 600 dairy herds have also faced issues from the disease. In addition, some farm workers have seen mild illness and one severe human case caused by a backyard flock occurred in Louisiana. Poultry and egg prices remain a problem, while beef and pork prices change as food choices fluctuate.
Political change
Recent elections bring potential policy changes to the ag community. Tariff issues in the first Trump administration created the potential for price fluctuation as foreign countries retaliated with tariffs of their own. When foreign markets close, the ag world often faces long-term losses. The Farm Bill received a one year extension, but farmers had hoped for a long-term, five-year bill to provide security and assurance going forward. The new Congress will need to agree on the many different aspects of the bill to secure needed assistance to farmers who face weather uncertainty and world production and trade issues.
CME midday prices: Price per bushel: March soybeans, $9.93; March corn, $4.54; March wheat, $5.46. February livestock per 100 pounds: Cattle, $190.20; hogs, $84.60. metals per troy ounce: February gold, $2,631; March silver, $29.90. March copper per pound: $4.12. February crude oil per barrel: $70.20. February natural gas $3.34 per 10,000 MMBTU. March cocoa $10.00 per pound.
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