Cocoa and coffee have become intertwined this year, with extreme weather and shortages fueling a rally in both commodities that tested traders’ limits.
Just like cocoa, the coffee market is facing serious shortages. And like cocoa, coffee production is concentrated in two countries. More importantly, many major traders trade in both commodities, so rising cocoa prices are squeezing these market players for cash and forcing them out of the coffee business.
The connection is important because it helps explain in part why coffee prices have soared – and how a cash crunch is shutting traders out of the market. Cocoa’s latest impact on coffee could ultimately be limited thanks to its differences from the chocolate-making ingredient.
