Earlier in the day, we wrote about how the combination of war and weather led to rising world prices for commodities such as wheat and corn.
And with oil boiling again, the inflationary impact is small.
Well, the blog’s extensive research team was looking for good news – something our readers often encourage us to do – and we found it (unless you grow coffee or cocoa).
Yes, coffee prices fell by 8% on Friday, and cocoa prices by 10%.
But enough good news.
Arabica coffee beans rose in price by 11% over the week, while robusta beans rose in price by a more modest 5%. Cocoa jumped 20%.
Market participants said a surge of speculative money seeking refuge hit commodities earlier this week, fueled by fears that El Niño weather conditions will intensify and lead to increasingly unfavorable weather conditions in key developing regions.
ICE then repeatedly raised margin requirements or advance payments on coffee and cocoa futures contracts throughout the week, limiting the amount of liquidity in the market and, in turn, increasing price volatility.
“There is a liquidity vacuum (and) many of these speculators are day trading. They are closing (the market),” said a coffee analyst at a multinational agricultural trading house.
Friday’s reprieve may prove only temporary as long-term weather forecasts point to bitter times for coffee and chocolate lovers.
The U.S. Climate Prediction Center projects an 81% chance of a very strong El Niño in October-December, which would be one of the largest on record.
El Niño is a particular concern for cocoa as it disrupts weather patterns in Ecuador, the world’s third-largest chocolate producer, as well as West Africa, where about 70% of the world’s chocolate ingredient is grown.
Cocoa futures nearly tripled in 2024 after the West African crop failed due to El Niño weather conditions, which lasted from mid-2023 to mid-2024 and was considered a moderate to strong event.
Ivory Coast’s top cocoa producer’s main crop is expected to fall by more than 10% in 2026/27 due to heavy rain, disease and poor crop management, pod counters and exporters based in the country say.
With Reuters
Prices for Robusta coffee (3 years) (LSEG)