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<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108076833-1734433401543-gettyimages-1981155057-q1015064_nluf1lrf-820x462.png" alt="" class="wp-image-567109" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108076833-1734433401543-gettyimages-1981155057-q1015064_nluf1lrf-820x462.png 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108076833-1734433401543-gettyimages-1981155057-q1015064_nluf1lrf-300x169.png 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108076833-1734433401543-gettyimages-1981155057-q1015064_nluf1lrf-160x90.png 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108076833-1734433401543-gettyimages-1981155057-q1015064_nluf1lrf-768x432.png 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108076833-1734433401543-gettyimages-1981155057-q1015064_nluf1lrf.png 1480w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">A worker prepares a flight of drinking chocolate for a customer at Katherine Anne Confections, an artisanal chocolate shop and cafe on February 02, 2024 in Chicago, Illinois. Scott Olson | Getty Images News | Getty Images</figcaption></figure>



The price of chocolate’s key ingredient has skyrocketed this year, prompting analysts to issue fresh warnings about extreme price volatility.



Cocoa futures for March delivery in New York traded as much as 1% higher at $11,938 per metric ton on Tuesday, notching yet another record high. It has since pared some of those gains, trading at $11,864 at around 8:20 a.m. ET.



The benchmark contract, which hit an all-time intraday high of $11,925 in the previous session, is up over 180% year-to-date.



It comes amid renewed concerns about adverse weather conditions and supply tightness in West Africa, home to around three-quarters of the world’s cocoa production.



Strategists at Dutch bank ING said persistent tightness in cocoa and coffee markets, coupled with weather uncertainty, meant that prices were likely to remain volatile through next year.



The global cocoa market registered its largest deficit in over 60 years in the 2023-2024 marketing year, ING said in a research note, citing data from the International Cocoa Organization (ICCO). It attributed this shortfall to crop failures in Ivory Coast and Ghana, the world’s largest cocoa producers.



“While prospects for the 2024/25 marketing year are looking better, there are still concerns over weather developments in West Africa and what it could mean for output this season,” Warren Patterson, head of commodities strategy at ING, said in a note published Dec. 11.



“Forecasts currently show that West African output – which accounts for more than 70% of global output – will edge higher. However, there are risks to this due to recent poor weather,” he continued.



Looking ahead, Patterson said prices were likely to remain historically elevated next year, which will be necessary “to keep a lid on demand.”



<h2 class="wp-block-heading" id="h-commodity-markets-remain-very-dangerous"><a></a>Commodity markets remain ‘very dangerous’</h2>



Like cocoa, coffee prices have also soared in 2024, with analysts recently warning it could take years for one of the world’s most traded commodities to recover.



Rabobank’s Carlos Mera singled out cocoa and coffee as commodities of interest to professional traders, although cautioned that commodity markets remain “very volatile” and “very dangerous.”



″[Cocoa] is one of the most obscure commodities so I wouldn’t advise anyone that doesn’t know to go in there but certainly it is one of the most fun commodities to look at,” Mera told CNBC’s “Squawk Box Europe” on Tuesday.



“And then coffee, we have another spike. Coffee has hit its highest price since 1977 [and] depending on which contract you look [at], it might be a historical record and record robusta prices as well … It is quite an interesting situation,” he added.

108076833-1734433401543-gettyimages-1981155057-q1015064_nluf1lrf

Cocoa prices climb to new record high, prompting fresh warnings about extreme volatility

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108075021-1734011164475-gettyimages-1456167226-gitech84-820x461.jpeg" alt="" class="wp-image-566950" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108075021-1734011164475-gettyimages-1456167226-gitech84-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108075021-1734011164475-gettyimages-1456167226-gitech84-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108075021-1734011164475-gettyimages-1456167226-gitech84-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108075021-1734011164475-gettyimages-1456167226-gitech84-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108075021-1734011164475-gettyimages-1456167226-gitech84-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/12/108075021-1734011164475-gettyimages-1456167226-gitech84-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">China is focusing on large language models (LLMs) in the artificial intelligence space.  Blackdovfx | Istock | Getty Images</figcaption></figure>



China’s attempts to dominate the world of artificial intelligence could be paying off, with industry insiders and technology analysts telling CNBC that Chinese AI models are already hugely popular and are keeping pace with — and even surpassing — those from the U.S. in terms of performance.



AI has become the latest battleground between the U.S. and China, with both sides considering it a strategic technology. Washington continues to restrict China’s access to leading-edge chips designed to help power artificial intelligence amid fears that the technology could threaten U.S. national security.



It’s led China to pursue its own approach to boosting the appeal and performance of its AI models, including relying on open-sourcing technology and developing its own super-fast software and chips.



<h2 class="wp-block-heading" id="h-china-is-creating-popular-llms"><a></a>China is creating popular LLMs</h2>



Like some of the leading U.S. firms in the space, Chinese AI firms are developing so-called large language models, or LLMs, which are trained on huge amounts of data and underpin applications such as chatbots.



Unlike OpenAI’s models which power the hugely popular ChatGPT, however, many of these Chinese companies are developing open-source, or open-weight, LLMs which developers can download and build on top of for free and without stringent licensing requirements from the inventor.



On Hugging Face, a repository of LLMs, Chinese LLMs are the most downloaded, according to Tiezhen Wang, a machine learning engineer at the company. Qwen, a family of AI models created by Chinese e-commerce giant Alibaba, is the most popular on Hugging Face, he said.



“Qwen is rapidly gaining popularity due to its outstanding performance on competitive benchmarks,” Wang told CNBC by email.



He added that Qwen has a “highly favorable licensing model” which means it can be used by companies without the need for “extensive legal reviews.”



Qwen comes in various sizes, or parameters, as they’re known in the world of LLMs. Large parameter models are more powerful but have higher computational costs, while smaller ones are cheaper to run.



“Regardless of the size you choose, Qwen is likely to be one of the best-performing models available right now,” Wang added.



DeepSeek, a start-up, also made waves recently with a model called DeepSeek-R1. DeepSeek said last month that its R1 model competes with OpenAI’s o1 — a model designed for reasoning or solving more complex tasks.



These companies claim that their models can compete with other open-source offerings like&nbsp;<a href="https://www.cnbc.com/quotes/META/">Meta</a>’s Llama, as well as closed LLMs such as those from OpenAI, across various functions.



“In the last year, we’ve seen the rise of open source Chinese contributions to AI with really strong performance, low cost to serve and high throughput,” Grace Isford, a partner at Lux Capital, told CNBC by email.



<h2 class="wp-block-heading"><a></a>China pushes open source to go global</h2>



Open sourcing a technology serves a number of purposes, including driving innovation as more developers have access to it, as well as building a community around a product.



It is not only Chinese firms that have launched open-source LLMs. Facebook parent Meta, as well as European start-up Mistral, also have open-source versions of AI models.



But with the technology industry caught in the crosshairs of the geopolitical battle between Washington and Beijing, open-source LLMs give Chinese firms another advantage: enabling their models to be used globally.



“Chinese companies would like to see their models used outside of China, so this is definitively a way for companies to become global players in the AI space,” Paul Triolo, a partner at global advisory firm DGA Group, told CNBC by email.



While the focus is on AI models right now, there is also debate over what applications will be built on top of them — and who will dominate this global internet landscape going forward.



“If you assume these frontier base AI models are table stakes, it’s about what these models are used for, like accelerating frontier science and engineering technology,” Lux Capital’s Isford said.



Today’s AI models have been compared to operating systems, such as Microsoft’s Windows, Google’s Android and Apple’s iOS, with the potential to dominate a market, like these companies do on mobile and PCs.



If true, this makes the stakes for building a dominant LLM higher.



“They [Chinese companies] perceive LLMs as the center of future tech ecosystems,” Xin Sun, senior lecturer in Chinese and East Asian business at King’s College London, told&nbsp;CNBC&nbsp;by email.



“Their future business models will rely on developers joining their ecosystems, developing new applications based on the LLMs, and attracting users and data from which profits can be generated subsequently through various means, including but far beyond directing users to use their cloud services,” Sun added.



<h2 class="wp-block-heading"><a></a>Chip restrictions cast doubt over China’s AI future</h2>



AI models are trained on vast amounts of data, requiring huge amounts of computing power. Currently,&nbsp;<a href="https://www.cnbc.com/quotes/NVDA/">Nvidia</a>&nbsp;is the leading designer of the chips required for this, known as graphics processing units (GPUs).



Most of the leading AI companies are training their systems on Nvidia’s most high-performance chips — but not in China.



Over the past year or so, the U.S. has ramped up export restrictions on advanced semiconductor and chipmaking equipment to China. It means Nvidia’s leading-edge chips cannot be exported to the country and the company has had to create sanction-compliant semiconductors to export.



Despite, these curbs, however, Chinese firms have still managed to launch advanced AI models.



“Major Chinese technology platforms currently have sufficient access to computing power to continue to improve models. This is because they have stockpiled large numbers of Nvidia GPUs and are also leveraging domestic GPUs from Huawei and other firms,” DGA Group’s Triolo said.



Indeed, Chinese companies have been boosting efforts to create viable alternatives to Nvidia. Huawei has been one of the leading players in pursuit of this goal in China, while firms like Baidu and Alibaba have also been investing in semiconductor design.



“However, the gap in terms of advanced hardware compute will become greater over time, particularly next year as Nvidia rolls out its Blackwell-based systems that are restricted for export to China,” Triolo said.



Lux Capital’s Isford flagged that China has been “systematically investing and growing their whole domestic AI infrastructure stack outside of Nvidia with high-performance AI chips from companies like Baidu.”



“Whether or not Nvidia chips are banned in China will not prevent China from investing and building their own infrastructure to build and train AI models,” she added.

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A record-breaking rally for coffee prices shows no sign of slowing down, analysts say, with some warning it could take years for one of the world’s most traded commodities to recover.



Arabica coffee futures with March delivery hit a fresh intraday high of 348.35 cents per pound on Tuesday, notching their highest level in nearly 50 years. The contract has since cut some of its gains but remains up a whopping 70% year-to-date.



The last time the price for arabica beans, the world’s most popular variety, traded that high was in 1977 when snow destroyed large areas of Brazilian plantations.



Renowned for their smooth taste and sweet flavor, arabica beans make up between 60% to 70% of the global coffee market. They are commonly used in espressos and other barista-made coffee.



Drought and high temperatures, alongside a global reliance on supplies from relatively few regions, are regarded as the primary drivers for the recent price rise.



Robusta futures, meanwhile, also climbed to a fresh record high in late November. Robusta beans are known for their strong and bitter flavor and are typically used in instant blends.



The extraordinary price rally for coffee, which is considered the second-most traded commodity by volume, after crude oil, comes amid concerns over the 2025 crop in Brazil, by far the world’s largest producer.



“The country experienced its worst drought in 70 years during August and September, followed by heavy rains in October, raising fears that the flowering crop could fail,” Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, said in a research note published Tuesday.



For some, the poor growing weather in Brazil means it could take a long time for coffee prices to unwind.



“History suggests that coffee prices will only ease back as and when supply improves and stocks are replenished,” David Oxley, chief climate and commodities economist at Capital Economics, said in a research note published on Nov. 29.



“Crucially, this is a process that can take years, not months,” Oxley said.



<h2 class="wp-block-heading" id="h-coffee-particularly-vulnerable-to-bad-weather"><a></a>Coffee ‘particularly vulnerable’ to bad weather</h2>



A staple beverage for billions of people across the world, demand for coffee has been boosted in recent years by growing consumption in China. Production, however, has struggled to keep up.



“Like cocoa, coffee is grown in a relatively narrow tropical band, with key producers including Brazil, Vietnam, Colombia, and Ethiopia,” Saxo Bank’s Hansen said.



“This concentration makes it particularly vulnerable to adverse weather conditions, especially in Brazil and Vietnam, which together account for approximately 56% of global production,” he added.



The U.S. Department of Agriculture said in its semi-annual report last month that it expects Brazil’s coffee production for the marketing year 2024/2025 to come in at 66.4 million (60 kilogram per bag) comprising of 45.4 million bags of arabica and 21 million of robusta.



The USDA said its forecast reflected a 5.8% drop from its previous projection, attributing the decrease to irregular weather patterns that negatively affected crop development, particularly for arabica trees.



“In Brazil, this will be the fifth consecutive arabica harvest that is disappointing because of adverse weather,” Carlos Mera, head of agricultural commodities markets at Dutch lender Rabobank, told CNBC via video call.



Asked whether the climate crisis appears to be amplifying the risks for coffee production, Mera said it was difficult to measure accurately, but there are growing concerns across the industry that extreme weather could prevent typical growth in coffee trees.



Looking ahead, Mera said coffee prices “can certainly go even higher” from their current record levels.



<h2 class="wp-block-heading"><a></a>Price increases for coffee drinkers?</h2>



For coffee drinkers, analysts say it is practically inevitable that coffee makers will need to pass on the costs to consumers in order to limit the impact of higher bean prices on their bottom line.



Nestlé, the world’s biggest coffee maker, which owns leading brands including Nescafé and Nespresso, said last month that it would continue raising prices and making packs smaller to offset the impact of higher prices.



“Like every manufacturer, we have seen significant increases in the cost of coffee, making it much more expensive to manufacture our products,” a Nestlé spokesperson told CNBC via email.



“As always, we continue to be more efficient and absorb increasing costs where possible whilst maintaining the same high quality and delicious taste that consumers know and love,” they added.



Italian coffee maker Lavazza and U.S. coffee giant Starbucks both declined to comment when contacted by CNBC.

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Coffee prices climb to near 50-year highs — and it may take years for the rally to run out of steam

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CNBC

Why Restaurants Have Become So Important To Shopping Malls

Why Fed Rate Cuts Aren’t Making Mortgages Cheaper

What does lab-grown meat look, smell and taste like?

How Employees Are Coffee Badging To Avoid Full Days At The Office

Cocoa prices climb to new record high, prompting fresh warnings about extreme volatility

China wants to dominate in AI — and some of its models are already beating their U.S. rivals

The future of meat? Inside the Oxford-based startup turning cells into ‘steaks’

Why Simu Liu is using his platform to uplift entrepreneurs

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Coffee prices climb to near 50-year highs — and it may take years for the rally to run out of steam

Costa Rica’s former president on why women make good leaders

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