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Cocoa Market Trading
Cocoa Trading Defined and ExplainedCocoa is the dried and partially fermented fatty seed of the cacao tree from which chocolate is made. In the United States, 'cocoa' often refers to cocoa powder, the dry powder made by grinding cocoa seeds and removing the cocoa butter from the dark, bitter cocoa solids. Cocoa is the world's smallest soft commodity market. Cocoa Prices & RatesCocoa futures are traded on two primary exchanges:
Cocoa Trading FundamentalsThe cocoa tree requires the hot, rainy climate of a tropical rain forest so is generally grown in areas within 20 degrees north or south of the equator. It takes the cocoa tree about five years after planting to produce cocoa beans and about ten years to achieve peak production so changes in production capacity do not come quickly. Each pod of the cocoa tree produces 20-50 beans, and it takes about 400 beans to make one pound of chocolate. Most cocoa is harvested between October and January. See how VantagePoint Software can predict the cocoa futures market with up to 86% accuracy* - Get Free Cocoa Market Forecasts now. Cocoa Trading TipsCocoa trading is an international market and subject to much intermarket influence from the value of the currencies in which the contract is quoted to the supply/demand issues for other tropical commodities. After cocoa traders develop a foundation of knowledge of the production cycles of cocoa cultivation and processing, it is important to recognize how that knowledge needs to be combined with an understanding of economic factors that affect each aspect of getting the cocoa from jungle to package. Traders need to examine the relationship between worldwide economic conditions and cocoa prices and trends.
Cocoa Trading InformationThe most prominent source of cocoa trading information is probably the International Cocoa Organization, which publishes the ICCO daily price for cocoa that is used worldwide as a historical and trend reference. A number of other international resources include reports on cocoa trends, news and information. The Netherlands Cocoa Association gives production data for much of the world market. The UN Food & Agriculture Organization provides information on the impact that cocoa production and cultivation have on local markets and indigenous people of growing regions. Exchanges where cocoa futures are traded also offer resource material. Cocoa Trading StrategySeasonal lows in cocoa prices tend to occur in January when the Bahia (Brazil) main crop becomes available and the market begins to anticipate declining consumer demand after the winter season ends. Consumer demand tends to rise going into late fall and early winter as processors accumulate supplies for the peak cocoa consuming period in the winter. However, seasonal tendencies in cocoa prices are usually not as strong as for some other commodities. Cocoa Trading SupplyThe largest cocoa producing countries are Cte dIvoire (Ivory Coast), which accounts for about 40 percent of world production; Ghana and Indonesia, about 15 percent each, and Nigeria and Brazil, about 5 percent each. The annual world production of cocoa ranges between 3 and 4 million metric tons. Two main diseases are threats to cocoa production black pod disease in Africa and witchs broom in Brazil, a fungus that caused severe cocoa production problems in the 1990s. However, the biggest threat to consistent cocoa supplies tends to be political, social and labor issues, which frequently threaten to decrease or disrupt the supply of cocoa. Cocoa Trading DemandThe leading cocoa bean importing nations are the Netherlands, United States and Germany, which account for more than half of world cocoa imports. The United States is the leading importer of cocoa products such as cocoa butter, liquor, and powder, accounting for 12% of world imports in recent years. The Netherlands and the United States each process about 15% of the world's annual cocoa production. U.S. cocoa imports come from Latin America; Europe imports from Africa, and Asia imports from Indonesia. Cocoa Trading HistoryCocoa apparently originated in South America and was combined with spices and served as a luxury drink in the Aztec empire of Montezuma. It was introduced into Central America by the ancient Mayas, and served as a luxury drink in the Aztec empire. Cocoa was brought back to Spain in the 16th century by the Conquistadores. For nearly a century, chocolate (usually made from cocoa, sugar, cinnamon and vanilla) became an exclusive drink of the Spanish Royal Court, until it gradually achieved a wider popularity in cocoa houses of major European cities. The Dutch were the major influence on the world cocoa market as cocoa transformed from a beverage to a solid form They invented the process of pressing cocoa to make cocoa butter and cocoa powder, thus making possible the manufacture of chocolate. The dominance of the Dutch industry in cocoa trading and these inventions laid the foundation for the Dutch cocoa grindings industry and established their presence in the world cocoa trade. Swiss candy maker Daniel Peter's invention of milk chocolate in the 1860s further increased the attraction for chocolate and the demand for cocoa beans. In 1925 the world's first cocoa bean futures contract was introduced at the New York Cocoa Exchange, which eventually became part of the New York Board of Trade and then ICE. Options on cocoa futures began trading in 1986. Breaking News
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* VantagePoint's accuracy statistics were computed on out-of-sample price data utilizing neural networks trained on both single market and intermarket data and relate to the Neural Index which indicates whether the average of tomorrows typical price and the typical price of the day after tomorrow (both unknowns at this time) are expected to be higher or lower than the average of yesterday's typical price and the typical price of the day before yesterday. The numerical value of the Neural Index, either a one (1) or a zero (0) thereby indicates whether or not the trend direction is expected to be higher or lower for each target market over the next two days. A Neural Network accuracy statistic of 80% does not mean that eight out of ten trades will be winning trades. VantagePoint is not a trading system that gives the same specific buy and sell signals to all users. It is a technical forecasting tool that is comprised of proprietary forecasting indicators that apply neural networks to market data for the purpose of finding patterns and relationships between markets and then using this information to make futuristic forecasts. Using these indicators each trader determines his or her own entries, exits and stop placements which may vary from those of other traders due to differences among traders in trading style, objectives, risk propensity, account size and number of contracts involved, thereby producing different trading results from one trader to another. Futures and options trading involves risk, is not for every trader, and only risk capital should be used. For more detailed information, please read our Important Disclaimer, Privacy Policy, and Software License Agreement. |
