Weekly cocoa market review 11/09/2020.
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ANALYSE TECHNIQUE DU CACAO
Last week, ICE U.S. cocoa futures closed higher at $2,3333 per ton.
The pandemic continues unabated, we've just surpassed 50 million cases worldwide, with more than 1.250 million deaths. Faced with the 2nd wave, Europe is confining itself or imposing curfews. The United States is the first country to exceed 100,000 new cases in one day. Joe Biden wants to set up a crisis unit. In Europe, many non-essential businesses are closed such as bars and restaurants.
After a very good 2019/20 harvest, the 2020/21 season is off to a strong start with arrivals in Ivorian ports of 406K tons on November 1st, compared to 287K tons at the same period the previous season. Crushing reports for the third quarter were down 4.7% in Europe, down 4.02% in the USA, and down 10.1% in Asia. Reconfinement and the closure of bars and restaurants in Europe will undoubtedly weigh on the 4th quarter.
Tensions in The Ivory Coast following the presidential election have resulted in about forty deaths since August. The opposition does not recognize this election and has announced the creation of a transitional government. In response, the government sent police units to surround the houses of opposition leaders, including that of Henri Konan Bédié, the former president. Guillaume Soro, in exile in France, called on the army to rise up. Opposition spokesman Affi N'Guessan was arrested and investigated for "conspiracy against the authority of the state" and "acts of terrorism".
According to Reuters, bean arrivals at Ivorian ports fell last week due to the risk of violence. Producers are afraid to return to the farms, and prefer to stay at home.
In the United States, Joe Biden will be sworn in on January 20, 2021, the Senate remains Republican for the moment, but there will be a second round in Georgia on January 5. If the Democrats win both seats, it would bring the distribution to 50-50 seats, and Vice President Kamala Harris could constitutionally break the tie. In the absence of a majority in the Senate, voting on a plan to support the U.S. economy would be made more difficult. Therefore, uncertainties remain as to the timing and amount of the plan. Last week the Fed reaffirmed its willingness to support the US economy and is ready to "increase its firepower" if necessary. The dollar fell sharply, with the DXY dropping from over 94 at the beginning of last week to close Friday at 92.236, a drop that benefited all dollar-denominated commodities.
WEATHER IN WEST AFRICA
Ivory Coast and Ghana experienced above normal rainfall in October with an average of more than 150mm. Last week's rains were also above the five-year average in most of Ivory Coast's cocoa-producing regions, with about 50 mm of rainfall. Forecasts in Ivory Coast and Ghana are now above normal for next week, with high probability of rainfall above 50 mm. With the unrest related to the Ivorian election, some producers have been reluctant to visit farms. A prolonged absence with heavy rains could impact the quality of the beans. It should also be noted that the dry season usually begins in mid-November, early December.
ICE US CERTIFIED COCOA STOCKS
Cocoa stocks are down to 3361 against 3456 thousand 60 kg bags last week. ICE US and EU cocoa stocks are above last season's stocks at the same period.
THE DOLLAR
The DXY index representing the Dollar against a basket of foreign currencies closed last week, down sharply at 92.236. The U.S. elections will continue to bring volatility to the currency market. Joe Biden will be sworn in January 20, the Senate remains Republican for now, but a second round will be needed in Georgia. Therefore, there is still a lot of uncertainty about the size and date of the famous plan to support the American economy.
Last week's statements by the FED certainly weighed heavily on the dollar. The FED announced that it could increase "its firepower" if necessary. Forex traders are therefore anticipating an increase in the money supply.
On Sunday, the United States experienced a record covid-19 for the 4th consecutive day, and even though the news was dominated by the elections, the pandemic could be remembered by investors if the US faces a 2nd wave similar to the one hitting Europe. A return of the dollar as a safe haven is not a possibility to be ignored. The dollar has a strong influence on the price of raw materials, and it will be very difficult to predict its evolution in the coming months.
A low dollar is generally favorable to the dollar-denominated commodity markets.
COMMITMENTS OF TRADERS
The weekly COT (Commitments of Traders) report of the Commodity Futures Trading Commission (CFTC) shows all the positions opened by all market participants. The COT report is published on Friday, and reflects the open positions on Tuesday of the same week. It shows the position of commercial traders (producers, commodity buyers, ...) but also non-commercial (speculators).
The net positions of speculators on the futures markets are particularly interesting to observe.
The speculative net position on the cocoa futures markets is down sharply this week to 6.908 K instead of 20.449 K.
ANALYSE TECHNIQUE DU CACAO
Last week, ICE U.S. cocoa futures closed higher at $2,3333 per ton.
The pandemic continues unabated, we've just surpassed 50 million cases worldwide, with more than 1.250 million deaths. Faced with the 2nd wave, Europe is confining itself or imposing curfews. The United States is the first country to exceed 100,000 new cases in one day. Joe Biden wants to set up a crisis unit. In Europe, many non-essential businesses are closed such as bars and restaurants.
After a very good 2019/20 harvest, the 2020/21 season is off to a strong start with arrivals in Ivorian ports of 406K tons on November 1st, compared to 287K tons at the same period the previous season. Crushing reports for the third quarter were down 4.7% in Europe, down 4.02% in the USA, and down 10.1% in Asia. Reconfinement and the closure of bars and restaurants in Europe will undoubtedly weigh on the 4th quarter.
Tensions in The Ivory Coast following the presidential election have resulted in about forty deaths since August. The opposition does not recognize this election and has announced the creation of a transitional government. In response, the government sent police units to surround the houses of opposition leaders, including that of Henri Konan Bédié, the former president. Guillaume Soro, in exile in France, called on the army to rise up. Opposition spokesman Affi N'Guessan was arrested and investigated for "conspiracy against the authority of the state" and "acts of terrorism".
According to Reuters, bean arrivals at Ivorian ports fell last week due to the risk of violence. Producers are afraid to return to the farms, and prefer to stay at home.
In the United States, Joe Biden will be sworn in on January 20, 2021, the Senate remains Republican for the moment, but there will be a second round in Georgia on January 5. If the Democrats win both seats, it would bring the distribution to 50-50 seats, and Vice President Kamala Harris could constitutionally break the tie. In the absence of a majority in the Senate, voting on a plan to support the U.S. economy would be made more difficult. Therefore, uncertainties remain as to the timing and amount of the plan. Last week the Fed reaffirmed its willingness to support the US economy and is ready to "increase its firepower" if necessary. The dollar fell sharply, with the DXY dropping from over 94 at the beginning of last week to close Friday at 92.236, a drop that benefited all dollar-denominated commodities.
WEATHER IN WEST AFRICA
Ivory Coast and Ghana experienced above normal rainfall in October with an average of more than 150mm. Last week's rains were also above the five-year average in most of Ivory Coast's cocoa-producing regions, with about 50 mm of rainfall. Forecasts in Ivory Coast and Ghana are now above normal for next week, with high probability of rainfall above 50 mm. With the unrest related to the Ivorian election, some producers have been reluctant to visit farms. A prolonged absence with heavy rains could impact the quality of the beans. It should also be noted that the dry season usually begins in mid-November, early December.
ICE US CERTIFIED COCOA STOCKS
Cocoa stocks are down to 3361 against 3456 thousand 60 kg bags last week. ICE US and EU cocoa stocks are above last season's stocks at the same period.
THE DOLLAR
The DXY index representing the Dollar against a basket of foreign currencies closed last week, down sharply at 92.236. The U.S. elections will continue to bring volatility to the currency market. Joe Biden will be sworn in January 20, the Senate remains Republican for now, but a second round will be needed in Georgia. Therefore, there is still a lot of uncertainty about the size and date of the famous plan to support the American economy.
Last week's statements by the FED certainly weighed heavily on the dollar. The FED announced that it could increase "its firepower" if necessary. Forex traders are therefore anticipating an increase in the money supply.
On Sunday, the United States experienced a record covid-19 for the 4th consecutive day, and even though the news was dominated by the elections, the pandemic could be remembered by investors if the US faces a 2nd wave similar to the one hitting Europe. A return of the dollar as a safe haven is not a possibility to be ignored. The dollar has a strong influence on the price of raw materials, and it will be very difficult to predict its evolution in the coming months.
A low dollar is generally favorable to the dollar-denominated commodity markets.
COMMITMENTS OF TRADERS
The weekly COT (Commitments of Traders) report of the Commodity Futures Trading Commission (CFTC) shows all the positions opened by all market participants. The COT report is published on Friday, and reflects the open positions on Tuesday of the same week. It shows the position of commercial traders (producers, commodity buyers, ...) but also non-commercial (speculators).
The net positions of speculators on the futures markets are particularly interesting to observe.
The speculative net position on the cocoa futures markets is down sharply this week to 6.908 K instead of 20.449 K.
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