(This is an excerpt from an article I originally published on Seeking Alpha on August 17, 2017. Click here to read the entire piece.)
For the past several months, I have maintained that cocoa prices and the iPath Bloomberg Cocoa SubTR ETN (NIB) are bottoming. I also figured that the bad news could not get any worse until at least forecasts for the next growing season (2017/2018). On Tuesday, August 14th, Reuters reported on optimistic outlooks from farmers in the Ivory Coast. Farmers claimed that the main growing season could start as early as mid-September, last through December, and produce an “abundant” crop. NIB promptly gapped down and fell 3.9% to close right above my $22 buying point for playing the current trading range. I pulled the trigger and bought. {snip}
Source: FreeStockCharts.com
Note that a return to weakness across the agricultural sector is likely acting like a sympathetic drag on cocoa and making it even more vulnerable to negative news. {snip}
Source: FreeStockCharts.com
The prospect for more price challenges did not discourage the Ghanaian government from committing to a flat producer price for its cocoa farmers in the 2017/2018 growing season. {snip}
At play may be strong confidence in the ability of Ghana and Ivory Coast to figure out how to command better pricing in the world market. {snip}
It remains to be seen whether hitting the 1M target in an over-supplied market will generate more revenue. {snip}
The International Cocoa Organization (ICCO) produced its last monthly market report for June, 2017. In this report, ICCO described June’s price swings down, up, and back down again as the result of reports of high global production, followed by adverse weather conditions, followed again by supply concerns on the announcement from the Ghana Cocoa Board of 6-year high production in Ghana. On the demand side, European grindings came in with a promising 2% year-over-year increase. No projections for the next growing season were yet offered.
{snip}
Full disclosure: long NIB
(This is an excerpt from an article I originally published on Seeking Alpha on August 17, 2017. Click here to read the entire piece.)