The cocoa plant was discovered in the 17th century, during the early exploration of America and quickly took over Europe where flavors and sweeteners were the predominant use of the cocoa bean. It is also known as Theobroma which means “ambrosia”The coca plant may be bitter, but the most decadent crop the world knows today is chocolate (a $98.3 billion industry). The cocoa plant is a very useful product as many products are made from an individual plant such as cocoa spirit, cocoa butter and cocoa powder. This is how you shop cacao in the commodity market.
Benefits of trading cocoa through CFD trading
• CFD gives you leverage on your Cocoa CFD trading
• Trade in the market for 17.5 hours
• Round the clock support in 14 languages
• Internationally Regulated Currency Broker
• Both manual and automated trading platforms are available
There are three main types of the cocoa plant that form when cocoa beans are harvested: trinitario, criollo, and forastero. Forastero is a hardy, thick-skinned plant that is the most well-known of the three species. The criollo plant is very sensitive to climate change and the slightest change in weather affects its yield. Trinitario, a mixture of the two, is known for the delicate taste of Criollo combined with the rich nature of Forastero. The two major cocoa exchanges are the Intercontinental Exchange (ICE) and NYSE Liffe (part of NYSE: Euronext Group).
• Cocoa working hours: 9:45 to 18:29 (GMT).
• Minimum Trade Size: 1
• Contract Size: Metric Tone
• Indicator symbols: Cocoa
Price information: dollars per ton
• Movement volume: 1 US dollar per ton
What affects cocoa prices?
Climate will be the main factor affecting cocoa plant production, which in turn will influence cocoa price Direct to consumer or trade cocoa futures prices and commodities. Drought and soil erosion will reduce crop yields as well as exposure to black pod disease.
Increased demand for chocolate around the world may raise prices, or that labor standards or changes in this area of agriculture will affect the price of cocoa. Production costs are relatively low, but technology is constantly changing and may be a factor to consider in the near future.
The main countries that produce and export cocoa beans are Côte d’Ivoire, which supplies more than 30% of the world’s total cocoa, topping with more than 1,448,998 tons annually. Secondly, Ghana, where 835,466 are grown in the West African country, and thirdly, on a global scale for cocoa production, Indonesia produces more than 777,500 tons annually.
Once the cocoa beans are collected, fermented, dried and transported, they are processed into various ingredients for commercial consumption in different industries such as soap, cosmetics, and confectionery. The country with the highest cocoa consumption globally is the Netherlands, which handles 13% of the world’s milling. Europe as a whole takes up 40% of the market with the remaining 60% evenly distributed between Asia, America and Africa.
Understand the cocoa trade
In this example, the trader opens a long position of 10 units of 1 ton each at the market price of $2027. After a while the price reaches the level of $2039.5 and the trader closes the position. The value derived from this contract can be calculated by multiplying the position size by the price difference:
10 metric tons x (2039.5-2027) dollars / ton = 125 dollars
Frequently asked questions about the cocoa trade
• What affects the price of cocoa?
With about 60% of the world’s cocoa supply coming from Cote d’Ivoire and Ghana, weather patterns in these countries can have a strong impact on the price of cocoa. Strong storms sometimes hit the area, straining the supply as farmers find it difficult to get the cocoa crop to port. Chocolate demand is also a major driver of cocoa prices, and public holidays usually see an increase in demand. Another problem is diseases and pests, which can damage crops, causing prices to rise significantly.
• How do I start buying cocoa?
The first step is deciding whether you want to trade cocoa futures on their own or if you will use a derivative such as CFDs. Cocoa futures contracts require a special account for futures contracts, the required margin is very high and the effect of leverage used in futures contracts makes trading with them a risky investment.
On the other hand, CFD trading is much easier, as it requires a much smaller initial deposit. There are many different brokers that offer CFD trading, and the fees are lower as well. Trading cocoa CFDs also allows the trader to determine the effect of leverage, which makes cocoa trading less risky.
• What is the best cocoa trading strategy?
There are a number of strategies that can be used for cocoa trading and the best of them are the most comfortable for the trader and which gives him a comfortable profit. The strategy used to trade cocoa can be either fundamental or technical in nature, although technical trading strategies tend to be the most successful. The best trading strategy will also change depending on whether the cocoa market is diversified or trendy.
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Plus500 is a CFD broker. Plus500 is a leading player that allows you to trade multiple ETFs and all global commodities via CFDs. to Plus500.