Chart of the Week: Cocoa Craziness

With Halloween just a week ago, and cocoa futures having sold off some since mid October after an impressive run – we can’t help but think of Homer Simpson and his infamous pumpkin bet:

Lenny: Hey, Homer! How come you’ve got money to burn? Or singe, anyway?

Carl: Yeah, Homer, what’s your secret investment?

Homer: Take a guess.

Barney: Uh, pumpkins?

Homer: [pause] Yeah, that’s right, Barney. This year, I invested in pumpkins. They’ve been going up the whole month of October and I got a feeling they’re going to peak right around January. Then, bang! That’s when I’ll cash in.

A few weeks later:

Broker: Homer, you knuckle-beak, I told you a hundred times: you’ve got to sell your pumpkin futures before Hallowe’en! Before!

Homer: All right, let’s not panic: I’ll make the money back by selling one of my livers. I can get by with one.

So what’s got into Cocoa? Outside of stock index futures, Cocoa holds the title for largest market gain so far this year up 19.8% {disclaimer: past performance is not necessarily indicative of future results}. Was it complete candy bar madness for Halloween? Are Chocolate lovers everywhere crowding the doors of every chocolate store, running to the shelves to get as much as chocolate as possible for the holiday season like the people rushing into Target the day after Thanksgiving?

CocoaChart Courtesy:
Disclaimer: Past performance is not necessarily indicative of future results)

No, according to our friends at RJO Futures, via the Wall Street Journal – it’s the wet weather in Indonesia and dry weather in Africa that might cause black pod disease (speaking of spooky Haloween stuff…)

“In Indonesia, they’re getting slammed with rain,” said Hector Galvan, senior broker at RJO Futures in Chicago. “Analysts are projecting black pod disease,” which rots cocoa pods, will become an issue.

… traders { are}worried that dry weather during the main-development period of the crop in West Africa may have hurt the quantity and quality of the beans coming out of that region, which produces about 70% of the world’s cocoa.”

So is your Snickers bar going to cost $20 – not quite yet… if we take a look at the larger picture, we see Cocoa is just returning to its 2012 numbers (and nowhere near its 2011 highs).  Oh, Homer’s broker may want to port his advice from pumpkins over to Cocoa also – as it also looks like Cocoa has sold off following October in 2011 and 2012.

long term CocoaChart Courtesy:
(Disclaimer: Past performance is not necessarily indicative of future results)

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