Cocoa and coffee have become intertwined this year, with extreme weather and shortages fueling rallies of both commodities that test the limits of traders.
Just like cocoa, the coffee market is facing severe shortages. And, like cocoa, coffee production is concentrated in two countries. More importantly, many major traders deal in both commodities, so soaring cocoa prices are squeezing those market players for cash and forcing them out of coffee trading.
The linkage is important because it helps explain in part why prices for coffee soared — and how a cash crunch is shutting traders out of the market. Cocoa’s latest impacts on coffee may end up being limited thanks to its differences from the chocolate-making ingredient.