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An Analysis of Cocoa Market Fundamentals and Price Transmission in the Cocoa Value Chain

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Abstract

After two decades of substantial stagnation, with consequent complaints from producer countries, the international price of cocoa beans has suddenly started to dramatically rise, attracting interest on this commodity, that is a fundamental source of income for millions of smallholders around the world. The present paper offers a broad analysis of the cocoa sector, divided into two main components: an investigation of the cocoa market fundamentals and an assessment of the price transmission inside the cocoa value chain. Both analyses rely on a Vector Error Correction Model, with yearly data (1961-2022) for the evaluation of market fundamentals and monthly data (January 1996-July 2024) for the price transmission investigation. An analysis of structural breaks is conducted in both cases. While the yearly market analysis, that combines prices and quantities, does not present structural breaks except for the price of cocoa beans, all residuals and predicted cointegrated equations of the price transmission analysis show a structural break.

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  • Rogna Marco & Tillie Pascal, 2025. "An Analysis of Cocoa Market Fundamentals and Price Transmission in the Cocoa Value Chain," JRC Working Papers on Economic Analysis of Policies for Africa 2025-05, Joint Research Centre.
    • Handle: RePEc:ipt:eapoaf:202505
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC142155
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