Chart of the Quarter

Q2: Is coffee cocoa (with a ten month delay)?

This Quarter's Chart shows coffee futures prices for Arabica and cocoa futures prices (NY Cocoa), converted to USC/lb as a common unit. The Cocoa futures are on a 10-month delay, showing prices on a 220-day offset. The reason for picking the timeline of 10 months is due to the difference in the timing of the Net Speculator position, which peaked for Cocoa in September 2023, on the back of an outbreak of disease and disrupted weather patterns in West Africa. Coffee's peak speculative positioning occurred in April 2024, remaining elevated for the next 6 months as prices climbed from $2.21 to over $4 per pound.

Cocoa and Coffee markets are related in the soft commodity space, and are often traded as a basket by cross-commodity funds. It is clear that just as the price action was peaking for cocoa, money managers were looking for a similar fundamental storyline to diversify into, and found it in coffee. Now that both markets are well past their peak price action, it is interesting to see how bullish investments get unwound from the perspective of prices. Overall, the resemblance in prices is striking, with coffee seeing a slightly less volatile price action. The latest selloff in coffee futures in May and June looks well aligned with cocoa's selloff following its last major rally to above $5/lb. Currently, coffee prices are consolidating in a lower range after sharply declining in early June. If "cocoa on a delay" continues to be an analog, we would expect this consolidation to continue until early August before resuming their downtrend.