It looks like you might have to earn even more for a Bournville in the near future. Agro commodities, collectively known as “soft commodities”, may be a safe bet during times of trouble as their prices are not subject to economic turbulence as hard commodities such as Gold or Crude Oil are. However, agro commodities can be unpredictable and very volatile as they are affected by the weather. Since the dawn of civilization humans have relied on a certain pattern of rainfall for their agricultural needs and often civilizations have collapsed when rainfall patterns took a turn for the worst. Ivory Coast, the largest producer of Cocoa, is currently being affected by lower than expected rainfalls which has raised prices for Cocoa.

Appreciation of USD for the past few months has contributed to a bearish trend in the market for soft commodities. However, with fears about lower than expected rainfalls, Cocoa September 12^th contract which had been trading at Rs 157 per Kg on June 25^th reached a high of Rs 177 on July 5^th. As an agro commodity with production concentrated heavily in the West African region, adverse weather news has panicked markets. Furthermore, analysts claim that Coco stocks are also running low which is adding further pressure on prices.

On Thursday 25^th prices reached their highest level in 6 months but ended the day slightly lower. Traders wishing to make use of this price rally should stay tuned to any weather related news in West Africa. If the weather situations improve, it is very likely that prices will take a dive very fast. However, with the current high demand for Cocoa products, coupled with low stock levels, any bad news will probably push the price of Coca even higher. Weather analysts have forecasted an el-nino pattern for the year which is likely to change weather patterns across the globe. So, do keep an eye on agro products!