(Bloomberg) -- Cocoa’s record-breaking run shows no sign of slowing as fears over shortages send prices to new highs on an almost daily basis. 

The rally has left other major commodities in the dust. Prices have as much as doubled already this year to exceed $8,400 a ton — a level that seemed unthinkable only a few months ago.

The main reason is poor harvests in West Africa, where most of the world’s cocoa is grown. That’s raising costs for chocolate makers and threatening even higher confectionery prices for consumers just as broader food inflation eases. And as buyers scramble to secure supplies, there’s a risk cocoa could become even more expensive.

Here are five charts explaining the unprecedented advance and what may come:

All-Time High

Futures roughly tripled in New York since the start of last year, with gains picking up steam since December. One technical measure suggests the market is overbought — though that has been the case several times since January and cocoa still climbed higher.

In mid-February, when cocoa was trading at about $5,600, Citigroup Inc. said prices could reach as high as $10,000 if the supply outlook deteriorates. That’s now becoming a bigger possibility.

“I don’t think there’s anyone out there who can predict where this train will stop with a straight face, just because of how unprecedented this kind of rally is,” said John Goodwin, a senior commodity analyst at ArrowStream Inc.

For consumers, higher prices may mean even pricier chocolate or smaller bars. It could even prompt new products with no cocoa at all as manufacturers opt for cheaper substitutes such as palm oil.

Global Shortage

West African growers have battled extreme weather — from heavy rain to heat and dryness — and crop disease that has ravaged harvests. Bean arrivals for exporting from ports in top grower Ivory Coast are almost 30% behind last year’s pace and the International Cocoa Organization forecasts a third straight global deficit this season.

Focus is now turning to the upcoming mid-crop, the smaller of two annual harvests, and Ivory Coast’s regulator expects that to shrink this season, Bloomberg reported this month. Major chocolatier Barry Callebaut AG has warned that acute cocoa shortages will persist into next season.

Extreme Market

The frenzied trading is evident in both futures’ spreads and volatility. The premium that the May contract commands over July futures spiked above $800 from below $100 in February, a sign of concern over tightening near-term supplies. Cocoa’s rally has also been accompanied by much bigger price swings, with a gauge of volatility at the highest in more than a decade.

Cocoa’s extreme price swings are bucking the trend of traders betting on becalmed markets.

Speculators Exit

While cocoa has rallied, speculators have actually been pulling out of the market. Open interest — the number of outstanding contracts — has dropped by about a third from a peak in late January. At the same time, money managers cut their net-bullish wagers roughly in half, the latest data show.

While it’s unclear exactly who has been driving prices higher, the reduced speculative interest indicates that physical buyers may have played a key role.

Star Performer

Other major commodities tracked by Bloomberg haven’t come close to cocoa’s start to the year. The gain in less than three months already exceeds any full-year advance that cocoa has seen since 1976 in New York.

“Cocoa prices continue to reach unprecedented heights, as tight supply and forecasts for large global production deficits have sparked panic buying,” The Hightower Report said.

--With assistance from Ilena Peng.

©2024 Bloomberg L.P.