Warm Up to Cocoa Futures on the Commodities Exchange - dummies

Warm Up to Cocoa Futures on the Commodities Exchange

By Amine Bouchentouf

Like coffee, the cocoa commodities market is subject to seasonal and cyclical factors that have a large impact on price movements. Check out the price of the ICE cocoa futures contract in recent years. As you can see, it can be pretty volatile.

Price of cocoa futures on the ICE, 2000-2010. [Credit: Source: International Cocoa Organization]
Credit: Source: International Cocoa Organization
Price of cocoa futures on the ICE, 2000-2010.

Cocoa is a fermented seed from the cacao tree, which is usually grown in hot and rainy regions around the equator. The first cacao tree is said to have originated in South America, where cocoa beans were used for both consumption and monetary purposes.

European traders came across the cacao tree and were so impressed with the tasty beverages made from cocoa beans that they brought some back to Europe, where cocoa beans were then turned into chocolate. From Europe, the cacao tree was introduced to Africa and, today, the cocoa trade is dominated by African countries.

Country Cocoa Production (Thousands of Tons)
Ivory Coast 1,190
Ghana 650
Indonesia 535
Nigeria 260
Cameroon 200
Brazil 155
Ecuador 150
Colombia 50
Mexico 45
Papua New Guinea 40

Cocoa production for import and export purposes is measured in metric tons. To put things in perspective, 3.3 Million Tons of cocoa were produced worldwide in 2005.

For a more nuanced understanding of the cocoa market and the companies that control it, check out these resources:

The ICE offers a futures contract for cocoa. Here is some useful information regarding this cocoa futures contract, which is the most liquid in the market:

  • Contract Ticker Symbol: CC

  • Contract Size: 10 Metric Tons

  • Underlying Commodity: Generic Cocoa Beans

  • Price Fluctuation: $1/ton ($10 per contract)

  • Trading Months: March, May, July, September, December