Commodity Blog

Commodity Prices – Cocoa

Cocoa jumped on the concern that the political unrest in Ivory Coast will disrupt supplies of the commodity. Alassane Ouattara, who is the internationally recognized victor of the November 28th election, attempts to weaken his political rival Laurent Gbagbo, who was declared the winner by the country’s Constitutional Council, by banning exports of cocoa to cut financial support of Gbagbo. Without funds Ouattara may lose support of the army. The plans for cocoa exports ban was supported by the US.

Patrick Achi, the spokesman for Ouattara’s government, explained:

Companies that flout the ban risk having to pay taxes twice as we are not going to recognize export payments to the illegitimate government of Gbagbo. On top of that, we will consider revoking their export licenses once this crisis is over.

Ahoua Don Mello, an adviser to Gbagbo, responded to the announcement of the ban:

Let them try, they will see. Economic actors like cocoa exporters know where their interests are.

The prices surged as they always do in time of a political unrest or other threats to supplies. The current problems affects not only this year’s harvest, but may harm cocoa production for the several next years, which only intensifies concerns.

Cocoa jumped 20 percent in New York since the November 28th elections and advanced 9.1 percent this month, the second biggest advance after cotton among the commodities tracked by the Thomson/Reuters Jefferies CRB Index. The analysts expect that cocoa may jump to $3,720 per metric ton, the highest price since January 1979.

Wheat rose today on speculation that floods may decrease supplies of the grain. This summer crop was harmed by droughts, now wet weather became an issue. Floods in Thailand and Australia threaten global supply and increase demand for the commodity. March futures for wheat delivery rose $0.085 (1.1 percent) to $7.485 per bushel by 13:15 on CBoT.

Cocoa supplies are also threatened, though not because of nature’s, but by humans’ actions: namely, because of a political tension in Ivory Coast. The Constitutional Court said that the ruling of Ivory Coast’s electoral commission to name Alassane Ouattara a winner of the election, which was held on November 28th, was invalid. Last night at least six people were killed and 17 were wounded in a shooting at the party office of Ouattara. March delivery for cocoa added $110 (4 percent) to $2,868 per metric ton at 14:00 on ICE.

Cocoa gained today on speculation that supplies from Ivory Coast may be disrupted. Political instability and civil unrest may prevent exporters from shipping harvested beans. The country is divided between government on the north and rebels, who control south of the country, while the elections were delayed since 2005.

Prices touched the highest level in 13 years yesterday on concern that unfavorable weather may decrease output in Vietnam and Colombia. Earlier prices fell as a stronger dollar diminished demand for commodities as an alternative investment. Analysts say that prices for cocoa may yet fall in case the dollar would regain its strength.

December delivery for cocoa gained $29 (1 percent) to $2,846 per metric ton by 12:03 on ICE. Cocoa gained 1.5 percent this week.

Cocoa reached the highest level in six weeks today on concern about possible disruptions of supplies from Ecuador because of fighting in the country. President Rafael Correa, who were held captive in hospital by police as part of a wage dispute or, according to the president’s opinion, as an organized coup attempt, were freed by Ecuadorean military forces. Ecuador accounts for 4 percent of global cocoa production. December delivery for cocoa rose $34 (1.2 percent) to $2,848 per metric ton as of 12:47 on ICE.

Soybeans dropped today to the lowest level in more than a year on speculation that favorable weather would boost crops in the US, Argentina and Brazil. Dry weather in the US will allow to accelerate planting, while rains in Brazil and Argentina will improve soil moisture for the crops. November futures for soybean delivery subtracted $0.4975 (4.5 percent) to $10.57 per bushel as of 13:15 on CBoT.

Good weather in also drove lower prices for wheat. Parts of Eastern Europe, including Ukraine and Russia, may receive about 0.8 centimeter (0.3 inch) of rain tomorrow, helping crops to recover from drought this summer. December futures for wheat delivery slipped $0.19 (2.8 percent) to $6.55 per bushel by 13:15 on CBoT.

Futures for orange-juice climbed to the highest level in three years as adverse weather may decrease citrus yield. Rainy season in Brazil delayed for about two weeks this year and rains expected to start next week. As a result of dry weather output of the main Brazil’s growing region estimated to total 271.7 million boxes of oranges, the smallest crop since 2001. Futures for November delivery orange-juice advanced $0.0525 (3.3 percent) to $1.6495 per pound at 10:23 on ICE.

Cocoa rose today to the highest level in four weeks on concerns that excessive rains would damage production in Ivory Coast, the largest grower in the world. Rainfall in Daloa region, the largest growing area, more than doubled from September 1st to September 10th compared with the same period in the previous year, threatening to curb output. December futures for cocoa delivery rose $21 (0.8 percent) to $2,800 per metric ton by 10:23 on ICE.

Wheat prices went up today on speculations that a weaker dollar would increase demand for US exports. Egypt, the biggest wheat buyer in the world, purchased 220,000 metric tons of grain from the US today. December futures for wheat delivery climbed $0.0475 (0.7 percent) to $7.2275 per bushel as of 11:27 on CBoT.

Soybeans gained today on speculation that US inventories will decline with increasing China’s imports. China bought 284,000 metric tons of US soybeans for delivery after September 1st, while Chinese processors may have purchased more than 1.2 million tons of soybeans from the US in the previous week. November futures for soybean delivery went up $0.0525 (0.5 percent) to $10.39 per bushel as of 10:12 on CBoT.

Cocoa slipped to the lowest level in three months in London on outlook for better harvest in Ivory Coast, the biggest grower in the world. The harvest starting next month may rise 11 percent to 1 million metric tons from 900,000 tons in the previous year. December delivery for cocoa gained $4 (0.1 percent) to $3,039 per ton by 12:03 on ICE.

Raw-sugar futures erased gains, sliding to the two-week low, on speculation that growing supplies from Brazil will curb the global deficit. Production in Brazil’s Center South, the largest producing region in the world, advanced 26 percent in the first half of July. October delivery for raw sugar fell 0.5 cent (2.7 percent) to $0.1774 per pound as of 13:10 on ICE.

Cocoa futures gained today after the report about increased demand in North America. The cocoa grind increased by 12 percent in the second quarter to 117,657 metric tons compared to the previous year. Analysts say that grinding numbers show strong demand and support prices. September delivery for cocoa rose $21 (0.7 percent) to $3,165 per ton on ICE.

Hogs futures went up today as hot weather in the U.S. causes decrease of animals’ weight, causing concern about declining pork supply. The animals tend to eat less with such jot weather, decreasing their weight. Hogs purchased yesterday by pork processors weighed 2 kilograms (4.44 pounds) compared to the same day in the previous month. October futures for hog settlement gained $0.00375 (0.5 percent) to $0.757 per pound on the CME.

Cocoa rose in New York today for the first time in three sessions as rainfalls slowed production in Ivory Coast, the biggest producer in the world. Prices may rise further in New York after the dollar weakened today. September delivery for cocoa gained $13 (0.4 percent) to $2,980 per metric ton at 9:38 on ICE.

Copper prices rose in New York today for the third consecutive session as rising equities and decreasing stockpiles promised steady demand. The LME-monitored inventories fell for the 14th session to the lowest level since November 30th. The MSCI World Index of shares rose for the second day, signaling about the improving global economic outlook. September futures for copper delivery gained $0.047 (1.6 percent) to $3.018 per pound as of 10:52 on COMEX.

Raw sugar rose today for a third consecutive day on outlook for increasing purchases from Russia next month as the import tax was lowered. Analysts say that sugar prices may go up 30 percent in 2010 on rising demand, low output and transportation delays. October delivery for raw sugar gained $0.0026 (1.6 percent) to $0.1654 per pound on ICE.

Cattle and hogs slid today on concern for economic growth as the U.S. payrolls was lower than expected. Demand for meat also tends to fall in July and August because of hot weather. August delivery for cattle futures slipped $0.002 (0.2 percent) to $0.8975 per pound as of 12:01 p.m. on CME. August settlement for hog futures dropped $0.008 (1 percent) to $0.8105 per pound.

Cocoa dropped today on concern that the U.S. economic recovery would stall, damping demand for commodities. U.S. nonfarm payrolls dropped in June more than expected. Housing market and manufacturing sector also showed signs of weakness. September delivery for cocoa declined $70 (2.3 percent) to $2,971 per metric ton on ICE.

Hog and cattle futures advanced on signs of the expanding global economic recovery, which may increase demand for U.S. meat. China’s exports jumped 50 percent from the last year, hinting that pace of the global recovery is accelerating. The weaker dollar also helped U.S. meat exports, making them cheaper, and thus more attractive, to oversees buyers. July futures for hog settlement rose $0.0075 (1 percent) to $0.7895 per pound by 10:05 on CME. August futures for cattle delivery gained $0.00525 (0.6 percent) to $0.8835 per pound.

Cocoa futures gained for the third consecutive day in New York amid concerns that the viral disease may hurt the crops, diminishing output in Ivory Coast, the biggest grower in the world. The only way for farmers to prevent spreading of swollen shoot, which is spread by insects and usually kills infected plants within two years, is by uprooting and burning infected trees. Global output will trail demand by 69,000 metric tons in the year ending September 30th. July delivery for cocoa advanced $13 (0.4 percent) to $2,994 per metric ton as of 10:16 on ICE Futures.