Cocoa, Cotton, And Coffee: Three Soft Commodities Making Moves…

| June 10, 2013 | 0 Comments

coffee and cocoaSoft commodities are making some hefty price moves in recent trading.

Here’s an update on the ones seeing the most volatility…

First of all, cocoa bulls are roaring once again.  In fact, this commodity was the second biggest gainer amongst all commodities last week, rising 7.5%.

What’s sending cocoa higher?

As I’ve mentioned in previous articles, the global cocoa market is expected to go into deficit later this year.  In fact, the International Cocoa Organization (ICCO) estimates a 45,000 tonne shortage by year-end. 

A tight market going into the high demand holiday season will likely push cocoa from its current price of $2,350 a ton up to $2,500 over the next few months.

The next soft commodity making waves is cotton…

The fluffy commodity rose just over 7% last week on global supply worries.  The world’s largest cotton merchant, Allenberg Cotton, just revealed global stocks could drop to the second lowest level in history.

The potential drawdown is partly due to ongoing drought conditions in parts of Texas, along with decreased cotton plantings across the US.   With corn and soybeans fetching far superior prices, many farmers are forgoing the lower priced crop this planting season.

What’s more, China is expected to keep a tight grip on their enormous cotton stockpiles.  It’s estimated that the Asian country controls over 50% of global cotton stocks.  And if the country resumes its cotton import program later this year, this commodity may zoom above the March 2013 high of $0.92 a pound.

And finally we have coffee…

But unlike cocoa and cotton, coffee is seeing a rapid decline in prices.  As a matter of fact, the caffeinated commodity has fallen 13% since the second week of May. 

Why such a dramatic downturn?

First of all, the leaf rust outbreak we talked about a few months ago hasn’t been as bad as analyst thought it might be.  That means Central American countries won’t see coffee production fall as much as previously thought.

What’s more, Brazil is on the verge of unleashing another huge crop on global markets. 

The country is expected to produce 48 million bags of Arabica beans in this year’s harvest.  And since last year’s Brazilian bumper crop has yet to be completely sold, investors are now pricing in a massive global coffee surplus.

Coffee is currently trading at $1.26 a pound, the lowest price since September 2009.  There’s no reason to get bullish of this commodity yet, but it is getting cheap.  At some point in the not so distant future, we’ll likely see a rush to buy.

Stay tuned to Commodity Trading Research for insight and analysis on all the commodity markets!

Until Next Time,

Justin Bennett

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Category: Cocoa, Coffee, Cotton, Softs

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.