Data-Driven Commodity Research, The Commodity Report

The Commodity Report

Data-Driven Commodity Research

A unique newsletter about commodities and macro analysis in a weekly format.

Commodities

ICE US - Cocoa Futures
The Cocoa contract is the world benchmark for the global cocoa market. The contract prices the physical delivery of exchange-grade product from a variety of African, Asian and Central and South American origins to any of five US delivery ports (Port of New York District, Delaware River Port District, Port of Hampton Roads, Port of Albany, or Port of Baltimore). Calls for delivery of any kind of cocoa bean as   long as it meets FDA standards for importation.   
Standards: Established by Exch. licensed graders  in accordance with specified tolerances for defects, bean count, bean size and other standards.

<ul><li>-30% // Cocoa Bubble Has Busted Just two weeks ago, the most-active contract hit a record of almost $12,000 a ton as the industry grappled with the fallout of severe supply shortages.</li><li>“It’s important to underscore that the recent downturn in cocoa prices is primarily a result of trading maneuvers, not a realignment of market fundamentals,” analysts at Fitch Solutions’ BMI unit said in a note, adding they expect volatility to persist.</li><li>Volatility spiked as bigger margin requirements spurred traders to close out positions, helping to drive aggregate open interest in cocoa futures to the lowest in more than a decade.</li></ul>

-30% // Cocoa Bubble Has Busted Just two weeks ago, the most-active contract hit a record of almost $12,000 a ton as the industry grappled with the fallout of severe supply shortages.“It’s important to underscore that the recent downturn in cocoa prices is primarily a result of trading maneuvers, not a realignment of market fundamentals,” analysts at Fitch Solutions’ BMI unit said in a note, adding they expect volatility to persist.Volatility spiked as bigger margin requirements spurred traders to close out positions, helping to drive aggregate open interest in cocoa futures to the lowest in more than a decade.

-30% // Cocoa Bubble Has Busted & Central Banks Buy Gold

Gold is a chemical element with the symbol Au (from Latin: aurum) and the atomic number 79. In its purest form, it is a bright, slightly reddish yellow, dense, soft, malleable and ductile metal. Chemically, gold is a transition metal and a group 11 element. It is one of the least reactive chemical elements, and is solid under standard conditions. The metal therefore occurs often in free elemental (native) form, as nuggets or grains, in rocks, in veins and in alluvial deposits. It occurs in a solid solution series with the native element silver (as electrum) and also naturally alloyed with copper and palladium. Less commonly, it occurs in minerals as gold compounds, often with tellurium (gold tellurides).

<ul><li>Going forward, Energy could face some selling flows from CTAs according to the latest CTA flow update by UBSS</li><li>UBS 'Contrarian' trades: bullish Agriculturals and LME Lead, bearish Energy, Cocoa, Lean Hogs and Platinum</li><li>UBS 'Go with momentum' trades: bullish Zinc, Aluminium, bearish Cotton, Sugar and Palladium</li></ul>

Going forward, Energy could face some selling flows from CTAs according to the latest CTA flow update by UBSSUBS 'Contrarian' trades: bullish Agriculturals and LME Lead, bearish Energy, Cocoa, Lean Hogs and PlatinumUBS 'Go with momentum' trades: bullish Zinc, Aluminium, bearish Cotton, Sugar and Palladium

Wheat Breakout & Commodity Positioning Update

<ul><li>Fund Managers Are Long Commodities Again Be careful if you’re heavily long commodities at the moment.</li><li>The Bank of America survey usually always works as a great contra sentiment indicator.</li><li>If fund managers are heavily long commodities - prices tend to top out.</li></ul>

Fund Managers Are Long Commodities Again Be careful if you’re heavily long commodities at the moment.The Bank of America survey usually always works as a great contra sentiment indicator.If fund managers are heavily long commodities - prices tend to top out.

<ul><li>Last week’s inflation data surprised market participants on the upside. CPI YoY: 3,2% vs. 3,1% estimate. Core CPI m/m: 0,4% vs 0,3% estimated</li><li>Even larger was the upside surprise in the PPI data. Friends of the 70s double-dip inflation scenario will probably love this chart.</li><li>Take a closer look at the 70s and how inflation recovered before it take of in the late 70s for another rip higher.</li></ul>

Last week’s inflation data surprised market participants on the upside. CPI YoY: 3,2% vs. 3,1% estimate. Core CPI m/m: 0,4% vs 0,3% estimatedEven larger was the upside surprise in the PPI data. Friends of the 70s double-dip inflation scenario will probably love this chart.Take a closer look at the 70s and how inflation recovered before it take of in the late 70s for another rip higher.

Inflation Surprises as Commodities Rip Higher

<ul><li>Top Commodity Trader is Long Cocoa Pierre Andurand’s hedge fund bet on higher cocoa prices ahead of a massive surge last month, according to a Bloomberg article.</li><li>Andurand said his firm expects cocoa-beans production globally to be down at least 18% on an annual basis, compared to most analysts’ expectations of 10-11%.</li><li>“This means that we will finish the year with the lowest stocks-to-grinding ratio ever, and potentially run out of inventories late in the year,” he added.</li></ul>

Top Commodity Trader is Long Cocoa Pierre Andurand’s hedge fund bet on higher cocoa prices ahead of a massive surge last month, according to a Bloomberg article.Andurand said his firm expects cocoa-beans production globally to be down at least 18% on an annual basis, compared to most analysts’ expectations of 10-11%.“This means that we will finish the year with the lowest stocks-to-grinding ratio ever, and potentially run out of inventories late in the year,” he added.