Count cocoa exchange traded notes (ETNs) among the commodities exchange traded products that are struggling in the early stages of 2016. The iPath DJ-UBS Cocoa TR Sub-Index ETN (NYSEArca: NIB) is off nearly 13% over the past month and some market observers are forecasting increased volatility for the cocoa market.

Last year, cocoa was supported by supply concerns out of west Africa where three-quarters of the world’s cocoa is produced, and the potentially negative impact of the El Niño weather pattern, which typically brings dry conditions across the region, reports Emiko Terazono for the Financial Times.

Looking ahead, market analysts are projecting a cocoa supply shortfall of 100,000 tons for this cocoa season of 2015 through 2016, with some expecting the supply deficit to fall by as much as 250,000 tons.

“Volatility in the cocoa-futures market is soaring as investors weigh signs of dwindling global demand for chocolate against concerns that adverse weather will hurt crops in West Africa, the world’s top producing region,” reports Melissa Mittelman for Bloomberg.

The El Nino weather pattern could also factor into cocoa volatility. For commodity traders, the rising temperatures have disrupted normal weather patterns, leading to powerful typhoons, spoiled cocoa harvests in Africa and fires in Indonesia, which may leave opportunities to pick and choose commodity exposure, especially as oil prices remain weak.

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