Cocoa surged 25.4% this week, and it is up 106% year-to-date. Since 2023, cocoa is up 261%. Price action in cocoa has been in the tails of distribution for the better part of this year due to harvest problems and supply shortages.
This week (March 11–March 15, 2024), cocoa prices surged 25.4%. Based on back-adjusted futures contracts since 1980, the weekly change was 1,622 points and that represents an 18-sigma event based on the available sample of 2,308 weekly changes.
In terms of percentage changes, this week’s 25.4% move was a 6-sigma event based on the same sample and continuous contracts.
Similar tail events have occurred in commodities in the past but have been rare. A recent tail event was an 11-sigma move in percentage terms and a 17-sigma move in weekly changes in wheat for the week ending March 4, 2022.
Back to cocoa, it is unclear when the market will return to normal conditions, and it is also hard to forecast a price equilibrium level. The only certainty is that much higher prices are in store for chocolate products.
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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