The use of cocoa can be traced back to ancient times in South America, when local cultures such as the Maya tribe had treated it as a luxurious resource that is served on special and festive occasions such as marriage ceremonies, ultimately tying chocolate to romance for all eternity. The Latin name of cocoa is Theobroma, which literally means Food of the Gods. It is no wonder that when cocoa was originally introduced to the Western world, it was considered to be food enjoyed solely by the wealthy.
In modern days, cocoa is considered to be one of the elements in the food group known as Super-Food. For many years it held a bad reputation due to its high calorie value. As time elapsed and research resources were invested in cocoa beans, a world of health qualities rose to the surface. Turns out that cocoa holds extraordinary nutritional health values, and amongst others, it contains flavonoids, which are famous for their contribution to lower blood pressure and improve blood flow to the heart and the brain, meaning they assist in reducing the risk of a heart attack or a stroke. Cocoa has even been linked to cancer risk reduction and negative cognitive decline at an old age.
The Cocoa Industry
The business of cocoa is hardly limited to farmers alone. Even though all cocoa-related products start at a harvest of the magnificent pods which contain the cocoa beans, there is an entire industry surrounding these beans. This global industry gave birth to several organizations and foundations that monitor its activity and host international conferences regarding one of the world’s most interesting commodities. Cocoa beans are grown and harvested by farmers and then gathered and exported worldwide in order to be manufactured into chocolate, or any other form of products that enjoy the qualities of the marvelous bean.
Other than being one of the world’s favorite types of food or beverages, cocoa is also one of the most traded commodities in global markets. The variety of products that are produced as a result of these beans is richer that one could imagine, some of the most prominent uses of the cocoa include:
- Various types of chocolate. Whether it’s dark, milk, mixed with additional goodies, or a ‘simple’ spread, it is vastly consumed worldwide.
- Countless alcoholic beverages such as liquors, alongside numerous kinds of soft drinks.
- Cocoa butter is also used widely in different cosmetic products such as moisturizing creams and soaps, which capture the unique cocoa scent and aroma.
It is no wonder that this is such a popular commodity, since it has a hold on many parts of our lives.
What Influences the Price of Cocoa?
As it is with any other traded asset, the price of the cocoa commodity is determined by a delicate balance of supply and demand. As the world’s consumption increases and supply goes the same way, or at least not decrease, prices should remain stable. However, in the case of cocoa, which is essentially a growing plant that depends on the agricultural environment, there are some external factors to consider.
In order to produce cocoa pods filled with cocoa beans, the evergreen tree requires a specific stable climate that can only be found close to the equator. Another unique element to the growth of the cocoa trees, is that they are not pollinated by bees or butterflies like other types of plants, they are rather pollinated by midge flies or by human intervention. Thus, global circumstances such as global warming and the shifting climate have a dramatic impact on agriculture Any environmental change can damage the growth pattern of the evergreen tree, in addition to a specific harm to the life expectancy of the midge flies and their colonies.
How Is Cocoa Traded?
Trading of the cocoa commodity takes place under strict global regulations on the International Exchange (ICE) and NYSE Euronext. It is bound by a Commodity Futures Contract, which is a trading agreement with a pre-fixed price and date for a certain amount of that commodity. The commodity’s value is based on the current market price multiplied by the actual value of the commodity futures contract. Since cocoa is tied to the commodity futures contract, each price movement has an ultimately different value. For example, in a cocoa contract a $1 movement can be equal to $10. Due to the commodity’s regulations, cocoa prices remain stable and usually there are no major loses nor any substantial gains.