Cocoa Jumps to 11-Month High on Supply Concern; Coffee Slumps
Comment of the Day

September 05 2013

Commentary by Eoin Treacy

Cocoa Jumps to 11-Month High on Supply Concern; Coffee Slumps

This article by Luzi Ann Javier and Marvin G. Perez for Bloomberg may be of interest to subscribers. Here is a section
Cocoa futures jumped to the highest in almost a year on mounting West African supply concerns. Coffee dropped to a four-year low. Sugar rose, while cotton and orange juice dropped.

Ivory Coast, the world's top cocoa exporter, and Ghana, the second-biggest, had an average of 1.25 inches (3.2 centimeters) of rain in the past 30 days, compared with 3.25 inches typically, Kyle Tapley, a meteorologist at MDA Weather Services in Gaithersburg, Maryland, said yesterday in a telephone interview. Inventories at warehouses monitored by ICE Futures U.S. have dropped 7.7 percent this quarter to the lowest since April 2.

“We won't know the crop losses until the harvest” starts next month in West Africa, Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a telephone interview.

“The drop in stockpiles is supportive for prices because it shows healthy demand in the cash market.”

Eoin Treacy's view The commodity market has returned to a position where instruments are assessed on their individual merits. Among the soft commodities the USA's weather situation has been making headlines but it's a big world and the conditions affecting other agriculturals are equally worthy of mention.

Following a steep decline, London listed cocoa has been forming a base above £1350 for nearly two years. It has rallied back to test the upper side of this range over the last few months and a clear downward dynamic would be required to check potential for a successful upward break. The US listing has a similar pattern.

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