Commodity-market-review

Weekly cocoa market review 12/07/2020.

ICEUS:CC1!   COCOA FUTURES
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TECHNICAL ANALYSIS OF COCOA

Last week, ICE U.S. cocoa futures closed higher at $2,654 per ton.
Ivory Coast lifts suspension of sustainability programs imposed on industrialist Hershey . Indeed, the U.S. chocolate maker has committed to pay the LID, a premium introduced by Ghana and Ivory Coast to ensure a decent income for producers. This marks a break in the tensions between the two countries and the manufacturer. The latter was accused last week of wanting to sabotage the LID by buying abnormally high volumes of cocoa directly on the futures market in order to avoid paying the premium.
For the 2020/21 season, the arrivals in Ivorian ports are 740K tons as of November 29, against 607K tons at the same period the previous season.
Cocoa stocks are down to 3048 thousand bags of 60 Kg .
The dry period in West Africa has begun and runs from mid-November to March. Producers hope that the Harmattan will not come too early this year. It is a dusty wind coming from the northeast of the Sahara that blows during the dry season. Harmattan can have a negative impact on crops. Below-normal rainfall in recent weeks could reduce the prospects for the end of the main harvest between January and March.
In Ivory Coast, Laurent Gbagbo would have received his passport on December 4 to be able to return to the country, a sign of appeasement sent by President Ouattara, certainly wanting to turn the page on the recent violence caused by the Ivory Coast presidential election.
Internationally, last week was marked by the sharp fall of the dollar. The DXY , after breaking the resistance of the 92, is heading towards the 90, and the Euro approached $1.22 after disappointing U.S. employment figures. Hopes for a vaccine, the FED reaffirming that the priority remains to support the economy, and the joint Democratic and Republican proposal for a $908 billion emergency plan are driving equity markets. Curiously, commodities as a whole did not benefit from the dollar's decline.
Discussions between the British and the Europeans continue as the December 31 deadline approaches in the hope of reaching a post-brexit trade agreement. Regarding the pandemic update, we have just passed the 67 million cases worldwide, with more than 1.537 million deaths . The United States continues to be the most affected country with more than 282,000 deaths and more than 14.7 million cases. Italy passes the 60,000 death mark, and the United States is facing a spectacular rebound of the epidemic with more than 230,000 cases Saturday, in 24 hours. The United Kingdom, the first country to license Pfizer vaccine, begins vaccination Tuesday.

WEATHER IN WEST AFRICA

Ivory Coast and Ghana experienced above normal rainfall in October with an average rainfall of more than 150mm. They were more mixed in November. The southern parts of these 2 countries received above normal rainfall and the northern parts were 50mm below normal. Cocoa trees are more affected by rainfall than any other climatic factor. The dry season started in Ivory Coast and Ghana and lasts from mid-November to March. Producers hope that the Harmattan will not come too early this year. It is a dusty wind from the northeast of the Sahara that blows during the dry season. Harmattan can have a negative impact on crops. The wind would already be present in the northern part of the country, which explains why rainfall was already more concentrated in the coastal areas. Last week the rains were lower than normal in Ivory Coast and Ghana.

ICE US CERTIFIED COCOA STOCKS

Cocoa stocks are down to 3048 against 3111 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 range of foreign currencies closed last week down to 90.701, and the trend is still bearish . The DXY after breaking the 92 resistance, plunged last week and is on its way to the 90. The Euro rose as high as 1.2175 on Friday after very disappointing U.S. employment figures. As a backdrop, Powell said the priority remains to support the economy, and Democrats and Republicans are working together on a $908 billion emergency support proposal as a first step. For later, once the Joe biden administration is in place, work for a more substantial plan. Forex traders are anticipating an increase in the money supply.
A low dollar is generally good for 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 up this week to 35.147 K instead of 34.465 K.

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