Hershey’s Warns About Cocoa Inflation // Latest CTA-Flow Forecast
The Commodity Report #181
Latest CTA-Flow Forecast
CTA positioning and UBS' flow model indicate slightly bullish momentum for some agriculture commodities as well as energy and on the flip side bearish momentum for precious metals and industrial metals.
Particularly we would like to highlight the expected bullish flows in cotton and bearish flows in the flesh markets, which align with some of our market setups.
UBS also shared a contrarian view on the USD which we find quite compelling.
“In currencies, the US dollar gained renewed momentum from Trump’s win, with the 1.7% rise in the DXY index on 6 November the largest one-day advance in two years. However, we expect such gains to fade over the medium term. The dollar’s overvaluation and the US’s significant twin fiscal and current account deficits are likely to weigh on the currency over time. Investors should therefore consider using current dollar strength to diversify into other G10 currencies.”
Hershey’s Warns About Cocoa Inflation
“If you look at the rates that we’ve been paying for cocoa this year, we said that back when we set our guidance in February, and so we said back then, we’re well hedged for 2024. So, the cocoa prices we’ve been paying this year reflect getting into the market really from earlier this year and preceding. Now you flash ahead to current pricing and you look at pricing for next year, it’s a pretty significant step-up. And it’s not just the cocoa side. The cocoa beans, of course, the biggest piece, but there's also cocoa butter, cocoa liquor and some of the other physical derivatives of cocoa that'll be inside that inflation” said Steve Voskuil, CFO at the chocolate manufacturer.
CEO Michele Buck added that “year-to-date results have been affected by historically high cocoa prices and a challenging consumer environment.” As a result, the company had to cut its guidance for 2024.
In Other News…
Another random side fact that I learned throughout the week. Donal Trump is only the second president in the history of the USA that gets another non-consecutive term. The only other example was Grover Cleveland after the civil war. Guess against who he secured his second term.
And here is another statistic that can be put into the basket of “mind-boggling numbers” by Deutsche Bank:
“As it stands, the S&P 500 is poised to see back-to-back annual gains above 20%. The only other time it's managed this since the 1950s was during the dot com bubble over 1995-98. However as our latest annual Long-Term Study “Lessons from the 1st Quarter Century of the Millennium” (link here) shows us, the first quarter century (QC) of the 2000s is set to be the second worst in real terms for US equities out of nine QCs since 1800, and the first one where they’ve under-performed Gold (+6.8%), an asset that doesn’t pay a dividend.”
“The challenge for the 2000-2024 QC in equities was a higher valuation starting point and a weaker demographic development than any other QC in history.”
This week, look out for the following:
Philly Fed Manufacturing Index on Thursday
Flash PMIs on Friday
Research Service
If you’re an institutional investor, check out our research products for commodity-related futures or equities here.
Till next Monday, Lukas
If you have any questions in the meantime, please feel free to contact me via X or Mail.