Jenkins Sugar Group Cocoa Report

 

February 24, 2011 – March 2, 2011

May	$3664	Up $33
July	$3609	Up $42

 

 

 

 

Metrics:

 

Trading this week left us only a modest advance in New York cocoa while London cocoa experienced a slight decline.  New York rose by 0.9%, while London eased by a smaller 0.5%. Currency accounts for the disparity, as the dollar index lost nearly 1%. The CRB by contrast had a robust week, trading higher by 3.14%.

 

Markets:

 

Flash crash drama - complete with a $450 decline within 60 seconds and a rebound of $350 in the next minute –aside, the market behaved in a pedestrian fashion this week. Why on earth would the market act in this way given all that is going on? It’s likely that much of the current and growing tensions have already been baked into current values. Ivorian distress, a weaker dollar, and encouragement from the macro commodity world are all factors grappling with more bearish factors including a good sized surplus and a promising upcoming mid crop (weather continues to be very favorable). The market seems as stalemated as the contending Ivorian presidents. Bulls would legitimately point out that the surplus is all well and good, but is currently unavailable to the marketplace. Reportedly, over 433,000 tons of cocoa beans are at Ivorian ports, waiting for permission to be exported if and when the export ban is lifted.

 

We are used to thinking in terms of the next $100 direction in prices. These days, it seems reasonable to think in terms of: ‘where’s the next $1000?”

 

 

(See link below, describing ICE’s policy on short term price spikes. Although the exchange notice refers to world #11 sugar, it covers cocoa and coffee in the text, under the “Soft Commodity Products” section),

 

 

 

Politics:

 

We’ve learned not to ask: “what else can go wrong?” But life lessons notwithstanding, things have deteriorated in Cote d’Ivoire, sadly and predictably. Let’s report in sequence a few headlines that have appeared since our last report a week ago:

                                                                                           

 

·         “Ivory Coast could face air, sea blockade” (from Nigeria’s foreign minister)

·         “Belarus arms Gbagbo, violating Ivorian embargo – UN”

·         Ivory Coast: UN experts attacked in Yamoussoukro (the ones investigating the accuracy of the Belarus story)

 

These are among the less serious items, as reports of escalating fighting have been reported in various sections of the country.

 

Given all that has occurred on the continent of Africa in recent weeks, we share this passage taken from J.M. Coetzee’s novel “Summertime”: “….leaders of African states: petty tyrants who can barely spell their own names, chauffeured from one banquet to another in their Rolls-Royces, wearing….. uniforms festooned with medals they have awarded themselves. Africa: a place of starving masses with homicidal buffoons lording it over them.”

 

 

 

Origin and fundamental spotlight:

 

·         Cote d’Ivoire:

o   Sanctions have impacted oil production. The SIR refinery, normally producing about 80,000 barrels daily, is reportedly operating at a minimum.

 

o   Nine newspapers closed until further notice because of what is described as harassment by Gbagbo’s supporters.

 

·         Ghana:

o   Ghana reportedly will introduce a new technology in an effort to increase crop yields. The project is being supervised by an agricultural ngo, with the goal of providing support to all growing areas. The technology involves extraction of fungus from the soil to provide “…single treatment support for the plants.” The process, with other support, would reduce dependence on artificial chemicals, improve soil fertility, and help sustainability efforts.

 

o   Boosted by its neophyte oil industry, Ghana’s economic growth is set to advance about 12%, per a news agency survey. Gold prices and, of course, cocoa prices are making a significant contribution as well.

 

o   Ghana’s parliament passed the much anticipated oil revenue management bill.
The majority of oil revenue – 70% -is to be dedicated to support its annual budget (including collateral for loans). The balance is to be dedicated to “Heritage & Stabilisation” funds – a kind of savings for a rainy day account.

 

 

·         Misc:

o   The West African stock exchange (BRVM) headquartered in Abidjan and home to equity trading for eight West African countries, was closed about 10 days ago owing to the Ivorian situation. It has recently reopened after having moved its operations to Mali.

 

·         https://www.theice.com/publicdocs/futures_us/exchange_notices/ExNot021811pricespikes.pdf

 

 

 

 

 

 

Best Regards,

 

 

Ken Lorenze

Jenkins Sugar Group

142 Old Ridgefield Road

Suite 205

Wilton, Ct 06897

Office: (203) –563-6100

Cell: (203)-722-4690

www.jenkinssugar.com

 

This report has been compiled for general informational purposes only.  While every effort has been made to ensure accuracy, Jenkins Sugar Group, Inc. assumes no responsibility for errors and omissions.