Did you listen last August when managing editor Brad Zigler warned you to grab cocoa while you could? If you did, you might be feeling pretty good right now, especially if you caught the Financial Times headline last week: Cocoa hits 23-year high on supply fears.

Or, you could be like me and wonder if it's time to start stocking up your favorite chocolate bars.

Either way, it's interesting to pull up a chart and take a look...

This doesn't look like a 23-year high. What is going on? Well, that's the U.S. chart...

The UK chart (from FT.com) looks like this:

The culprit behind the disparity in charts can be traced to the British pound. London cocoa is priced in sterling - and when sterling fell last month, an arbitrage opportunity occurred for investors with foreign currencies. Those investors were able to buy the cheaper sterling-based contracts, rather than the dollar-based NY contracts, which served to further drive London's cocoa price up.

But the currency impact is only part of it: There is no question that cocoa has been on an upward tear recently. In fact, if you look back over the past 18 years, you can see that cocoa has been riding high recently.

It's Supply, Stupid

What's driving cocoa prices higher? Supply, supply, supply.

Back in February of 2008, tight supplies were forecast in the cocoa market, along with higher prices. Analysts called for a 14% rise in cocoa prices in the U.S., which would have pushed prices up to $2,325/tonne.

They underestimated the move: Despite the broader pullback in financial markets, cocoa in NY was sitting at $2,626/tonne on Friday, December 26. If NY cocoa hangs tight, it could end the year some 30% up - an outstanding performance given the other pricing trends in commodities right now.

On the other side of the Atlantic, cocoa is up almost 70% for the year as of Friday.

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