Thrillers and Suspense
The roller coaster of cocoa prices continues. Since the December 16 high of $3,636/ton, cocoa prices have dropped by almost $600/ton as measured by the ICCO Daily Price. There hasn’t been much in terms of news that might warrant this decline. Yes, production in the current year is higher than previously expected, but the surplus of 80,000 tons (as predicted by the ICCO according to a Bloomberg article) isn’t very much in light of previous four years of deficits.
What goes up must come down. The old trading adage certainly applied to cocoa this summer. After reaching $3,290/ton on July 1, the futures price dropped to $2,801/ton by July 28. That’s a drop of almost $500 in a month. Nobody can explain such a decline with changes in supply and demand of cocoa. There was no news of larger than expected increases in cocoa supplies. If anything, there were indications that the light harvest in both Ghana and the Côte d’Ivoire would be less than last year. So it’s back to the speculators.
Continue reading “We Need A New International Cocoa Agreement”
Last Friday, the New York Times reported that the increase in commodity prices and the resulting increase in prices ordinary consumers pay has attracted the attention of regulators and politicians. The specific target are speculators who are suspected of having driven up futures prices. The article goes on to repeat the arguments made by the advocates of futures trading–that speculators are necessary to make the futures market work and that there is a big difference between a speculator and someone who manipulates the market.
I thought that it might be good to explain how the futures market works, something the article fails to do. Continue reading “Are Speculators the Problem?”
