Cocoa is a luxury commodity and a crucial ingredient in many of life’s finer things, from sweets to pharmaceuticals to various cultural dishes. Its popularity makes it a prominent asset on the stock market, but supply problems, environmental and political issues can sometimes make it an unstable investment. Here we discuss how you can invest in cocoa and the risks that come with it.
3 ways to invest in cocoa
We run through the most common and accessible methods:
1. Invest in cocoa ETFs
Exchange-traded funds (ETFs) allow you to invest your money in a variety of assets rather than focusing your investments in one or two firms. ETFs are a very accessible way of entering the market and function in a similar way to normal stocks. They are often seen as a more straightforward, and less risky, way of investing your money. Trusting your money to a collection of assets makes your investment more resilient to the individual fluctuations within the market. If you are a newcomer to the investment world, ETFs may be something to consider. Here’s the one that’s exclusively focused on cocoa:
iPath Bloomberg Cocoa Subindex Total Return ETN (NIB), which tracks the cocoa price via futures contracts.
Pros
ETFs allow access to a larger and more diverse area of the cocoa industry at competitive prices.
ETFs are often seen as a safer choice for investments, especially if you are a newcomer.
Cons
By investing in the basket of assets that make up an ETF, you sacrifice some of the control you might have had by investing in a single company.
Terms apply. Cryptoassets are highly volatile. Your capital is at risk. Available in the US, CA, UK and AU
Disclaimer: This page is not financial advice or an endorsement of digital assets, providers or services. Digital assets are volatile and risky, and past performance is no guarantee of future results. Potential regulations or policies can affect their availability and services provided. Talk with a financial professional before making a decision. Finder or the author may own cryptocurrency discussed on this page.
Trade $0 commission stocks, ETFs, and options with as little as $1
After-hours trading available
Earn 4.5% interest on uninvested cash with Gold
24/7 customer support
2. Purchase stock in cocoa companies
One rather common way of investing in a commodity is through stocks. Due to cocoa’s market popularity, there are a variety of companies for you to choose from. Some of the most recognizable names include:
Even though companies like Nestle and Hershey are often recommended as solid investment choices, investing in stocks still requires some market knowledge. While ETFs can dilute strong performance from a few outstanding stocks, they are inherently diversified and may offer some protection against company-specific risks.
Pros
An accessible and conventional way of entering the market.
You can withdraw from the market at any time.
A large selection of company stocks available to choose from.
Cons
As a result of its demand and the areas it is sourced, cocoa is a politicized commodity that can be used as a bargaining chip during periods of political friction or negotiation. As a result of this, cocoa prices can periodically fluctuate violently, making a big impact on your investment.
3. Purchase cocoa futures
A more complex type of investment for cocoa growers, large buyers, advanced investors and speculators, buying futures allows you to directly buy large quantities of cocoa at an agreed price to receive at a later point in the future. Whether you make great returns on your investment or lose money depends heavily on the movements of the market. Futures are direct but risky. They’re vulnerable to market fluctuations, so they rely heavily on the buyer’s knowledge. This type of investment can punish the buyer just as easily as rewarding them, so market newcomers may want to gain some experience first. If you’re interested in trading futures contracts, check to see if your brokerage allows futures trading or choose one of the handful that does. You’ll probably also have to access a separate section of the trading platform, as futures and stocks are listed on separate exchanges.
Pros
Futures give you direct ownership over an asset.
Cocoa futures can reward buyers with solid returns if they approach them with strong market knowledge.
Cons
Futures expire if they aren’t used within the agreed-upon period, making them worthless.
Unpredictability and volatility are part of the nature of the market. Futures are very vulnerable to price fluctuations, and making a bad investment can cost a lot.
Compare these providers for access to cocoa ETFs, stocks and more
1 - 9 of 9
Paid non-client promotion. Finder does not invest money with providers on this page. If a brand is a referral partner, we're paid when you click or tap through to, open an account with or provide your contact information to the provider. Partnerships are not a recommendation for you to invest with any one company. Learn more about how we make money.
Finder is not an advisor or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.
Who is most likely to be researching investing in cocoa?
Finder data suggests that men aged 35-44 are most likely to be researching this topic.
Response
Male (%)
Female (%)
65+
6.15%
2.69%
55-64
8.27%
3.46%
45-54
17.50%
3.46%
35-44
21.15%
5.38%
25-34
14.42%
5.96%
18-24
9.23%
2.31%
Source: Finder sample of 520 visitors using demographics data from Google Analytics
How much is cocoa worth now?
Is cocoa a safe investment?
Cocoa’s global popularity makes it a massive commodity and a popular investment in the market. Even so, there are risks involved in any investment, cocoa included:
Environmental conditions: Cocoa grows under specific weather conditions, and if these conditions shift suddenly, they can drastically affect crop yield and subsequently commodity supply. Additionally, environmental changes influence pollination and plant growth, once again impacting general supply.
Political friction: As mentioned above, cocoa is sometimes used as a political bargaining chip to influence international decisions and conflicts. Many of the nations that serve as major cocoa suppliers have only recently found their place in the global market and rightly want to make the most of this highly desired commodity.
Labor: For a long time, cocoa harvesting has been reliant on cheap or child labor. Recently there has been a massive shift towards fairer working conditions and salaries, which has increased production costs, meaning that cocoa prices have been at their highest since first transitioning from being a luxury to an everyday commodity. Regardless of prices, however, the shift towards better welfare conditions is a welcome change.
Bottom line
You can invest in cocoa by purchasing ETFs, stocks or futures. But before you commit, familiarize yourself with the risks of investing in this commodity, as cocoa is vulnerable to political and environmental shifts. Compare your investing options across commodities and trading platforms before you buy.
Frequently asked questions
Cocoa prices have risen from a historic 2000 low of about $700 per ton and have traded in the range of roughly $2,000 to $3,500 over the last decade. 2019 ended at about $2,500 per ton.
Cocoa is mainly found in areas of Africa such as the Ivory Coast and Ghana, and in parts of South America like Brazil and Colombia. Cocoa comes from the seeds inside cocoa pods, which are dried before being put to use.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Advertiser Disclosure
Finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which Finder receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. Finder compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
