Cocoa prices mainly respond to cocoa supply and demand factors. International prices tend to follow a long-term pattern linked to the cocoa cycle, which has been estimated to be of over 20 years.
During cocoa boom periods there is a supply surplus that will result in falling and then stagnating prices. Consequently, low prices due to overproduction generally have a negative impact on harvesting, encouraging farmers to switch to other crops, a factor which again permits world prices to rise. The cocoa cycle is thus characterized by boom and bust effects.
Since the 90's, the general trend on the evolution of cocoa prices is fluctuating and slightly rising.
Between January 1989 and May 1998, cocoa prices increased generally. However, from June 1998 they started to fall reaching their minimum value in January 2000. Finally, in 2009 cocoa prices re-grew and reached their peak. In early January 2009, London witnessed a new record of 2028 euros per ton.
World prices and production of cocoa (from 1960/61 to 2010/11)
Source: UNCTAD based on the data from International Cocoa Organization, quaterly bulletin of cocoa statistics
The two principal cocoa exchanges are located in London and in New York. The following graph shows data from the New York Board of Trade (closing price of the 1st position for futures). We can see the short term volatility of these prices in the year 2000.
Price instability index, price trends (in current and constant dollars terms) over 1980-1990, 1990-2000 and 2000-2010.
Source: UNCTAD stat