Cocoa prices surged on Monday for the fourth straight session, surpassing $9000 a tonne for the first time ever due to a supply crisis as chocolate producers struggle to procure the grains. 

Cocoa futures surged by 50% this month, with prices already doubling this year as the industry faces a crisis due to bad weather and crop disease in West Africa, where most of the world’s cocoa is produced. 

The Price

Cocoa prices surged by 5.4%, or $479 a tonne today to $9400, the highest ever, with a session-high at $8889. 

Cocoa rose by 4.5% on Friday, the third profit in a row due to concerns about global supplies.

Cocoa surged by 11.5% last week, the second weekly profit in a row as the supply crisis grows. 

The prices are approaching $10 thousand a tonne, which was unthinkable just a few months ago, and makes cocoa costlier than the industrial metal copper. 

Which are Chocolate Costs Surging? 

The extreme rise in cocoa prices will boost chocolate prices throughout the year, with several manufacturers already trimming the sizes of their products or advertising other items with different ingredients to weather the hit.  

How EU Regulations Contribute to the Crysis 

The cocoa supply crisis could worsen soon as the EU imposes regulations to ban products that contributed to forest destruction, which could complicate efforts by European chocolate manufacturers to procure supplies. 

West African Harvest 

The West African cocoa harvest has been unusually small this year, with Côte d'Ivoire authorities warning of low harvests this season. 

The dollar fell in European trade on Monday against a basket of major rivals, giving up five-week highs and on track for the first loss in three days on active profit-taking. 

Investors still expect the Federal Reserve to cut interest rates starting next June, which hurts the appeal of the US currency.

The Index

The dollar index fell 0.15% today to 103.28, with a session-high at 103.48.

The index closed Friday 0.4% higher, the second profit in a row, hitting a five-week high at 104.50 on active investment demand. 

The index rose 0.95% last week, the second weekly profit in a row on strong expectations that central banks in Europe, the UK, and Switzerland will take a more accommodative stance on monetary policies compared to the Federal Reserve. 

US Rate Prospects 

The markets are pricing in a 75% chance of a Fed interest rate cut in June, with a total of 75 basis points of US interest rate cuts expected this year.

Now investors await a series of remarks by Fed officials later this week, in addition to important US personal spending data to gauge the path ahead for policies. 

The Dollar Outlook

Credit Agricole’s forex analysts said in a memo that the dollar is likely to perform better than the euro, which is more exposed to downward pressures in upcoming days.

They believe that the US economy remains flexible , with a tight labor market, which could lead to a more bullish Fed stance on policies this year. 

Gold prices rose in European trade on Monday, resuming gains after a two-day drop off record highs, with the new gains coming as the dollar declines against major rivals. 

Investors still expect the Federal Reserve to cut interest rates starting next June, which hurts the appeal of the US currency.

Gold Prices 

Gold prices rose 0.6% to $2178 an ounce, with a session-low at $2163, after losing 0.75% on Friday, the second loss in a row on profit-taking off record highs at $2222. 

The precious metal rallied to the record high on March 21 as Fed policymakers expected 75 basis points of rate cuts this year despite recent strong US inflation data.

And following bearish policy meetings by central banks in the UK, Japan, Switzerland, and the US, gold prices rallied 0.5% last week, marking the fourth weekly profit in five weeks.

The Dollar 

The dollar index fell 0.2% on Monday off five-week highs at 104.50 against a basket of major rivals. 

The dollar has lost ground this wait in wait for more data and clues on the future of theUS interest rates this year.

US Rate Prospects 

The markets are pricing in a 75% chance of a Fed interest rate cut in June, with a total of 75 basis points of US interest rate cuts expected this year.

The SPDR

Gold holdings at the SPDR Gold Trust fell 3.17 tonnes on Friday to a total of 535.33 tonnes, away from recent February 14 highs. 

Euro rose in European trade on Monday against a basket of major rivals, amid attempts to recover from three-week lows as investors await more clues on the future of European interest rates. 

Some analysts believe the euro might fall below 1.08 on prospects of an interest rate cut in June by the European Central Bank, while the Federal Reserve could maintain interest rates at current levels for an extended duration. 

EUR/USD 

EUR/USD rose 0.15% to 1.0823, after losing 0.5% on Friday, the second loss in a row, hitting a three-week trough at 1.0801 amid risk aversion. 

Euro lost 0.75% against the dollar last week, the second weekly loss in a row on renewed concerns about the Europe-US interest rate gap. 

Downward Outlook 

Scotiabank analysts said in a recent memo that short-term technical analysis indicates a likely decline, potentially below $1.08. 

Geoffrey's Group’s forex analysts said the EUR/USD pair is primed for a potential drop towards $1.0700. 

Crédit Agricole forex analysts expect a stronger performance by the dollar compared to euro, which is likely to face multiple headwinds in upcoming days. 

Such headwinds, in the form of data, could pressure the ECB to cut interest rates in June, while the US economy continues to prove flexible, which in turn could convince the Fed to delay any potential rate cuts to the second half of the year.