The winds will threaten the “mid crop” for cocoa, which is usually harvested in the spring, Roemer told MarketWatch this week. ”This will strain nearby supplies even further, but we are at historic high prices and the question becomes whether consumer demand will slacken off at some point.”

Earlier this year, cocoa saw a selloff from the April high through its October low, Barchart’s Newsom said — and that looks to be a “normal seasonal move” given that the harvest tends to begin in October. Once 2024 supplies started to come in, the market traded the “reality of a smaller crop, leading to new highs posted this month.”

Cocoa futures have gained almost 27% this month so far.

The International Cocoa Organization forecast a global cocoa production deficit of 478,000 metric tons for the 2023 to 2024 season, which ran to the end of September, according to a late November report. Year on year, it expects world production for the season to be down 13.1% and end-of-season stocks to fall by 26.8%.

Usually, weather returns to favorable for cocoa when La Niña forms, said Roemer. The U.S. National Oceanic and Atmospheric Administration said in mid-December that La Niña conditions were most likely to emerge from November of this year to January 2025.

However, a warming global climate and tight cocoa supplies have “painted a ‘cautiously’ friendly attitude in this market the last two months,” said Roemer, with cocoa prices trading near their record high.

Prices late reached an all-time intraday high of $12,931 on Dec. 18.

For now, that doesn’t appear to have led to a shift in consumer demand.

“We see this time and again in agricultural commodities — challenging weather hits production, yet demand remains robust,” Jake Hanley, managing director and senior portfolio specialist at Teucrium, told MarketWatch. “My family has already consumed our fair share of chocolate chip cookies this season, and there is no sign of slowing down!”

“Overall food inflation has picked up, nearing 2.4% in November after bottoming around 2% in August,” said Hanley. “Yet, like coffee, chocolate is one of those things consumers are reluctant to give up. Poster items for inelastic demand.”

Still, some may believe that a crash in cocoa prices might occur soon, following its big price rally. But continued weather issues in West Africa, combined with seasonal bullish tendencies, could still mean even higher prices, according to Roemer. At this time of year, cocoa prices tend to rally if supplies are tight ahead of the holidays, which see more chocolate purchases, he said.

“While profit-taking could occur at any time, there are so many fundamentals to follow in this market. Don’t step in front of a freight train,” said Roemer.

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