Commodity Blog

Commodity Prices – Cocoa

Cocoa dropped on concerns about the European crisis and the slower-than-expected economic growth in the United States. Traders remained concerned about the potential outcome of talks among Greece and its creditors. US gross domestic product rose 2.8 percent in the last quarter, while the expected growth was 3.0 percent. It’s still better than the 1.8 percent advance in the third quarter of 2011.

Earlier, the agricultural commodity reached the highest price since November as European NYSE-monitored stockpiles fell 1.8 percent since January 9. Additionally, concerns that dry weather in Ivory Coast will hurt output were boosting prices.

Cocoa closed at $2,361 per metric ton on ICE, falling from the opening of $2,452. Intraday, the price reached $2,480 — the highest level since November 14.

Cocoa futures posted the biggest gain since October 2009 as a strike in Nigeria threatened to disrupt shipments. The strike of Nigerian workers that started today may lead to ports shutting down. Nigerian farmers stopped selling crops after fuel prices doubled and the government removed fuel subsidies, while prices for crops fell 40 percent. Cocoa spot price climbed from $2,033 to $2,171 per metric ton on ICE as of 22:02 GMT today and reached $2,199 earlier.

Crude oil fell today after a report showed that German industrial production declined. Germany’s output dropped 0.6 percent in November, following the 0.8 advance in October. Oil also slid on easing concerns that Iran would disrupt oil supplies from the Persian Gulf. February contract for delivery of crude oil slipped $0.25 to $101.31 per barrel on NYMEX, the lowest price this year. Brent oil declined from $113.42 to $112.33 on ICE.

The lack of positive news from the European Union spurred the return of the downward rally in commodities. Significant drops are seen in the cocoa and soybean futures. The decline was also notable for speculative precious metals — silver and gold.

Investors wait for the European officials to agree on the Greece bail-out plan and its implementation. It’s a very important step, as with the failure of Greece or any other eurozone members the global financial climate would severely deteriorate, sending all markets (except several safe haven assets, like the US dollar and the Japanese yen) crumbling.

Cocoa was in an uptrend during the last two days and has now lost a half of its gain. Soybeans haven’t really stopped falling and now demonstrate the strongest decline since Friday. Both these agriculture commodities depend heavily on the state of the global economy. As a considerable part of their recent growth can be attributed to speculative buying, these positions are now getting closed by the traders to cover up losses in more “serious” markets — stocks and bonds.

Cocoa December futures fell from $2,704 to $2,654 per 10 metric tons as of 16:38 GMT on ICE today with an intraday low at $2,630. Soybeans November futures declined from $1,260.50 to $1,238.50 per 5,000 bushels on ECBOT.

The Cocoa futures fell today as the market reacted to the news coming out Cameroon, the Africa’s fourth biggest producer of this soft commodity.

The production of the cocoa beans more than doubled to 6,840 metric tons last month (from 3,200 metric tons in June 2010). Cameroon’s Cocoa and Coffee Board also reported an increase of 16 percent (to 5,547 tons) in country’s cocoa exports in June.

Meanwhile, the market experts estimate the global cocoa surplus at about 292,000 tons. Although the price for the commodity remains near its past year’s levels, there’s little positive for the cocoa bullish traders to be seen in the recent news from the suppliers.

September cocoa futures is down from $3,032/ton to $2,973/ton or almost 2 percent as of 17:39 GMT on ICE today. The daily minimum was set at $2,972.

Cocoa fell on the speculation that there will enough supply to satisfy demand. INTL Hencorp Futures LLC predicted that a global surplus of cocoa will be 156,000 metric tons by September. The strengthening dollar also had its negative impact on commodities, including cocoa and wheat. September delivery for cocoa tumbled as much as $89 (3 percent) to $2,886 per ton as of 12:01 on ICE, posting the biggest drop since May 5.

Supply of wheat is also expected to be ample and therefore prices went down. Russia plans to lift the ban on exports by July 1, while rainy weather should help the crops in Ukraine. The US Department of Agriculture increased its forecast for global inventories on June 9 to 184.26 million metric tons, up 1.7 percent from the forecast in the previous month. Futures for delivery of wheat in September sand $0.31 (4.2 percent) to $7.0825 per bushel by 13:15 on CBoT after it reached $7.0325, the lowest price since March 17.

Sugar prices fell to the lowest level since September as specialists forecast that exports from Thailand, second biggest shipper in the world, will increase. Cocoa and coffee also fell.

Thailand may export 7 million metric tons of sugar this season, and that would be a record. Analysts are afraid that surge of exports can create oversupply on the global markets.

At the same time, demand for the sweetener may decline as Asian countries are expected to slow their economic growth. India and Brazil signaled that they are considering another round of interest rate increases, while China continues its attempts to rein the rapidly growing inflation.

July for raw sugar delivery fell as much as $0.007 (3.2 percent) to $0.2135 per pound by 14:00 on ICE, following the drop to $0.2133, the lowest price since Sept. 10. Futures on raw sugar lost 34 percent this year.

July contract for cocoa delivery slipped $60 (1.8 percent) to $3,211 per metric ton at 11:58. Futures on Arabica coffee for delivery in July dropped $0.1165 (3.8 percent) to $2.945 per pound.

Cocoa jumped to the highest level in a week on concerns that political tensions in Ivory Coast will disrupt supplies. Clashes between forces of the former president, who refused to give up power, and the supporters of the internationally recognized winner of the passed presidential elections continue with sporadic gunfire. July contract for cocoa delivery rose $14 (0.5 percent) to $3,070 per metric ton by on ICE.

Corn jumped on anticipation that demand from livestock producers will rise after exports of US meat increased. The US Meat Export Federation reported that beef exports surged 25 percent in February from a year earlier, while exports of pork rose 8 percent. Corn also advanced on concerns that cool, wet weather will harm crops. July futures for corn delivery jumped $0.035 (0.5 percent) to $7.61 per bushel as of 13:15 on CBoT.

Natural gas gained on speculation that demand will increase as the US economy recovers. The Energy Department predicted that consumption of gas will increase to 66.75 billion cubic feet per day this year. May contract for natural gas delivery went up $0.043 to $4.141 per million British thermal units on NYMEX.

Cocoa fell on as concerns about the political tensions in the Ivory Coast eased. The troops of Alassane Ouattara, the internationally recognized winner of the presidential election, gained control of the capital. May future for cocoa delivery fell as much as $70 (2.3 percent) to $2,987 per metric ton as of 12:06 on ICE.

Cattle futures jumped to the record on the anticipation of higher demand from Japan. The retail prices for beef in the US touched the all-time high last month as supplies declined. June futures for cattle delivery rose $0.01675 (1.4 percent) to $1.19575 per pound by 13:00 on CME. The price rose to the record $1.198 earlier.

Soybeans gained to the highest level in a week on the speculation that supply may decline as farmers prefer to plant corn. US Farmer may forecast to plant 76.79 million acres with soybeans this year, compared to the previous forecast of the US Department of Agriculture of 78 million acres. May future for soybeans delivery added $0.08 (0.6 percent) to $13.695 per bushel at 10:41 on CBoT.

Cocoa rallied to the highest price since 1979 on the concerns that the political tensions in Ivory Coast will curb supplies. Incumbent President Laurent Gbagbo refused to give away power to his rival Alassane Ouattara after the elections. The probable civil war would likely be negative for cocoa supply. May delivery for cocoa rose $14 (0.4 percent) to $3,747 per metric ton as of 7:31 on ICE.

Cotton jumped to the record today on the prediction that demand will continues to exceed supply. US exports of cotton climbed 56 percent to 403,341 bales in the week ended February 24 from the previous week. The National Bureau of Statistics reported that production in China, the largest consumer in the world, slid 6.3 percent in 2010. Prices more than doubled last year. May delivery for cotton advanced by the exchange limit of $0.07 (3.4 percent) to $2.127 per pound, the all-time record, by 14:47 on ICE.

Copper headed to its first weekly gain this month as the signs of the global recovery outweigh the concerns about the situation in Middle East. The positive reports from the US, especially the employment data, bolstered the confidence in good state of the economy. Futures for copper traded at $4.5105 per pound on COMEX after advancing 0.5 percent to $4.5120.

Political unrest in Ivory Coast boosted cocoa to the 32-year record. Former president Laurent Gbagbo refused to step down, turning the power over to new internationally recognized president Alassane Ouattara. The country’s prime minister said that the only was to resolver the dispute is protests like the ones in Egypt. May contract on delivery for cocoa rose $61 (1.8 percent) to $3,499 per metric ton as of 12:06 on ICE.

Gold and silver advanced on the concerns about the unrest in Middle East. The request from Iran to allow two naval ships through the Suez Canal on their way to Syria was accepted by Egypt. Israel called this passage a ”provocation”. The tensions also escalated in Yemen. March futures for silver delivery gained $0.726 (2.3 percent) to $32.296 per ounce by 13:25 on COMEX. April futures for gold advanced $3.50 (0.3 percent) to $1,388.60 per ounce.