Cocoa prices expected to remain volatile in the first quarter of 2022

Global commodity prices have been on a bullish run, hitting record highs due to various factors including the impact of COVID-19 on the global supply chain. The pandemic led to the shutdown of many industries, causing disruptions in the supply chain, which in turn has fueled a surge in commodity prices across the board. Ted George, Chief Narrative Officer at Kleos Advisory, discussed the outlook for soft commodities in a recent interview on CNBC Africa. Cocoa prices, in particular, are projected to remain volatile in the first quarter of 2022, hovering around $2,400. This volatility can be attributed to factors such as supply chain disruptions, high demand post-pandemic, and fluctuating chocolate consumption patterns. Despite evidence of a good crop season in West Africa, cocoa prices continue to fluctuate, reflecting the uncertainty in the market. The record crop in West Africa last year and the positive outlook for the current season suggest that there is an abundant supply of cocoa. However, the reopening of global markets post-Omicron is expected to drive up demand, leading to potential price surges in the short term. While cocoa prices may see more volatility and higher prices in the near future, the long-term sustainability of these high prices remains uncertain. In addition to cocoa, coffee prices have also experienced a significant rally, reaching record highs and doubling in price compared to the previous year. Brazil's bad weather conditions and uncertainties about the upcoming season have contributed to the surge in coffee prices. Coffee producers in West Africa, such as Nigeria, Ghana, and Cote d'Ivoire, have an opportunity to benefit from the high prices, as it is more cost-effective to export coffee from these regions to Europe. This presents a positive outlook for West Africa's coffee exporters amidst the market volatility. The impact of these soaring commodity prices extends to the food market as well, with food prices reaching record levels globally. Erratic weather patterns in growing regions and disruptions in the supply chain have led to a significant increase in food prices. While some regions, like southern Africa, have seen successful maize harvests, which could help stabilize prices locally, overall, food prices are expected to continue rising. The high inflation rates driven by surging commodity prices are putting a strain on households across the African continent and the world. The future outlook for commodity prices remains uncertain, as the global market navigates through supply chain disruptions, changing demand patterns, and fluctuating weather conditions. Only time will tell whether the current high prices are sustainable in the long run.