Cocoa traders have predicted that cocoa prices are set to increase. This estimate follows an incredible period during which the price of the commodity has dropped by up to 40 per cent since touching a 16-year high in October 2002.
In London, the benchmark Euronext-Liffe cocoa price fell to £920 (€1,329 ) a tonne this week, its lowest price since January 2002 according to the Financial Times. This is down from its peak of £1,620, which was reached in October 2002.
The price has fallen further than many within the market had expected, causing many experts to believe that the commodity has hit rock bottom.
This fall in price has been partly explained by impressive crop yields in Africa. The Ivory Coast , which reported a bumper harvest, accounts for about 40 per cent of global production alone.
Last summer saw heavy investment in cocoa futures in anticipation that the civil war in the Ivory Coast would create crop shortages. However, Ivory Coast production from October to April was largely unaffected by the civil war.
Moreover, the Ivory Coast government has just raised its forecast for the October-to-September year to a near record 1.4 million-tonne harvest.
Despite the price declines, cocoa futures trading volumes are up. Euronext-liffe has reported that cocoa volumes were up about 37 per cent to the end of May. This is on top of the 19 per cent increase last year.
Euronext-Liffe is one of the main trackers of African cocoa prices.