From portfolio theoretical points of view, investors should sprinkle their capital properly. Raw materials – such as cocoa – also offer as an investment vehicle.
• Investments in physical cocoa, certificates & Co.
• Note price factors
• Exciting alternative in the raw material range
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Cocoa was temporarily among the worst raw material investments. However, it is an indispensable raw material for the sweet seduction of life. Investors who can imagine cocoa as a portfolio component should read the present article and find some interesting information about the possibilities about cocoa investments.
Investment in physical cocoa
When investing in physical cocoa, it should be noted that storage and insurance can devour a lot of money. In addition, cocoa is not infinitely stable and could lose quality over time. The investment in physical cocoa should therefore not make a big sense for private investors.
Investments in cocoa certificates
However, more sense, especially for private investors, could make it participating in the cocoa price through certificates. This can happen on the long or short page, ie it can be rising or falling cocoa prices. The certificates have the option of investing in papers from well -known issuers who ideally reproduce the price development of the cocoa 1: 1 or are levered with a certain factor. In the case of leverage certificates (e.g. factor certificates), the profit but also loss possibility is significantly higher than with normal certificates- depending on the selected lever.
Since raw materials are traded on the appointment exchanges and, due to warehouse and interest costs, there are usually a higher price than contracts closer to the time due to warehouse and interest costs (contango situation), if necessary, roll losses are incurred when investing in cocoa certificates. These arise from the fact that future contracts are sold before leaving and the money has to be transferred to the next future. Rolling into the next future should be avoided. A cocoa price in the contango tends to be associated with roll losses. This can even lead to the situation that although the raw material has increased in the price, the certificate could not participate “perfectly” or even gives the investor a loss.
Some issuers have already responded to the rolling problem described and offer certificates that are intended to minimize or switch off such roll losses. The costs of such papers tend to be higher than with certificates without this mechanism. So: eyes open in the product selection.
The situation for investors is different if the closing cocoa future is higher in terms of price than more distant futures. A so-called Bachwardation situation is spoken here that could bring roller winnings. If, for example, the March Future for cocoa is higher than the May Future for cocoa, if necessary, more money will be taken when selling the March Future than for the May Future. This enables roller profits.
Since raw material certificates are purely legally considered Bonds If it is also clear to every investor that if the issuer is insolvency, the capital invested can also be lost. So: also eyes open when choosing the issuer.
Investment in cocoa cfds
Contracts for differences (CFDS) offer another possibility of an investment in cocoa. CFDs are offered by special CFD brokers and, as with cocoa certificates, enables participation in the cocoa price on the long and short side. With only low capital, private investors can also participate in cocoa price development using CFDs.
Since enormous jumps in raw materials are not uncommon, it would make sense to choose a CFD broker that excludes the obligation to make additional payments. In the worst case, the paid capital should only be lost in the CFD account. The other capital of the investor would not be in danger due to the exclusion of the obligation to make additional payments.
Price factors for the cocoa price
The typical primary price factors for the cocoa price include the global cocoa offer and the cocoa issue. On the one hand, the offer is determined by production in the main cultivation countries (e.g. Ivory Coast, Indonesia, Brazil). In particular due to weather influences, the harvests can be different and either lead to a higher or lower cocoa offer.
In addition to production, however, the inventory on cocoa beans and their additions and decreases are also an interesting factor on the offer side. It should also be noted that cocoa is grown in politically susceptible regions. Political unrest, coup attempts, government crises etc. may have a significant impact on the cocoa offer and thus on the cocoa price.
On the demand side, it depends on how many cocoa beans are required, for example, for the production of sweet seductions (chocolate). Since the global demand for chocolate products should increase in the long term with the world population, in the long run can be assumed that it is growing. In addition, in the long run, the increase in the middle class in populated developing countries should be able to provide increased demand.
However, secondary factors are also interesting for the price development of cocoa, including the price of the US dollar. A upgrading (derogatory) US dollar to other currencies should tend to have a price-damping (price-stringing) effect on the cocoa price. Why? Quite simply: cocoa is traded in US dollars. An increasing US dollar makes cocoa more expensive for other currency areas, so that the price should theoretically adapt. The result would be a tendency to fall. In other words, a weaker US dollar would make the cocoa cheaper for other currency areas; The cocoa price would therefore have to rise.
Other secondary factors for the cocoa price are seasonal effects. Every raw material – including cocoa – has certain phases a year in which price rises or price declines are more likely. Information on seasonal conditions at the cocoa price can be of enormous importance for potential cocoa investors.
Conclusion
In the case of a possible investment in cocoa, there are various investment vehicles available, which can be chosen depending on the inclination and according to the specific opportunities and risks. Every investor has to decide whether cocoa is the right portfolio component for the private depot. As an exciting alternative in the raw material range, cocoa is probably an interesting basic product.
Editor finance.net