Cocoa Reaches All-Time High - First Time since 1960 // Crack Spreads continue to Diverge
The Commodity Report #141
Cocoa Reaches All-Time High - First Time since 1960
A long-held commodity price record has fallen: The price of NY cocoa futures has surged to almost $5,400 a ton, surpassing the $5,379 peak in place since 1977 ( roughly 46 years ago). Cocoa was one of the few commodities that hadn't set a fresh nominal price record in the 2000s.
The current rally is fuelled by the El Nino weather phenomenon which is causing drier temperatures in West Africa, where three-quarters of the world’s cocoa is produced - this fundamental weather event has now led to a short squeeze situation in the cocoa futures market. Due to heavy “Harmattan winds” in the region, many crops have been destroyed.
The Harmattan is a season in West Africa that occurs between the end of November and the middle of March. It is characterized by the dry and dusty northeasterly trade wind, of the same name, which blows from the Sahara over West Africa into the Gulf of Guinea.
Exporters and pod counters in No. 2 cocoa producer Ghana told Reuters output for the current 2023-24 season is expected to reach just 475,000-500,000 tons versus 655,000 last year.
Last week, a Reuters cocoa poll forecasted a global deficit of 375,000 tons in the 2023/24 season, more than double the average view in the previous poll in August, and indicating a third successive supply deficit for the market.
An industry source told Reuters that traders feared the shortage would extend into next year, with missing volumes from this season's crop having to be filled with beans from the next.
Crack Spreads continue to Diverge
The physical public oil market signaled a divergence with the forward futures contracts for some time - last week forward crude contracts broke out again to the upside.
This week look out for the following:
CPI data on Tuesday
Retail Sales data, Empire State Manufacturing Index and Philly Fed Manufacturing Index on Thursday
PPI data and Prelim UoM Consumer Sentiment on Friday
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Till next Monday, Lukas
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