Softs Update: Cocoa Is On Fire!

| September 6, 2013 | 0 Comments

coffee and cocoaLet’s look at the most recent happenings in soft commodities…


Recent developments out of West Africa have cocoa bulls rampaging.  The highly demanded commodity has shot up just over $410 a ton since early July.  That’s a remarkable 20% gain in a matter of months.

What’s sending prices higher?

Early signs of weakening production in Ivory Coast, the world’s largest cocoa producer, has the market preparing for an imminent supply crunch.  In fact, the International Cocoa Organization suspects the market will be in deficit by 52,000 tons this season.

And listen to this…

Highly respected commodity firm, Commodity Risk Analysis, believes cocoa demand will outstrip supply by nearly 210,000 tons.  If such a bullish scenario comes to fruition, it will likely send cocoa prices to new 52-week highs over $2,700 a ton.


An ongoing global supply glut has coffee trading at $1.17 a pound, a level not seen since mid-2009.  According to the USDA, international coffee producers will oversupply the market by 4.4 million bags for the 2013-2014 season.

And if that weren’t enough, the Brazilian Real is helping push prices lower as well…

With the Brazilian economy struggling to hold onto growth, the country’s currency isn’t getting much love from investors.  As a matter of fact, the Real is down around 15% on the year versus the US Dollar.  The weak currency makes imports costlier and exports cheap- a bearish mix for coffee prices.


In what was one the stronger commodities this year, cotton is suddenly finding immense selling pressure.  The fluffy commodity is down $0.11 a pound over the past two weeks to trade at $0.82 a pound- a swift 12% drop.

What’s going on?

Market rumors of China slowing cotton imports have investors running for the exits.  Since China is the number one consumer of cotton in the world, changes to their import quotas can have a huge impact on prices.

As you can see, there’s plenty of excitement in the world of soft commodities…

If you’d like to capitalize on this volatility, there are ETNs allowing investors access to these markets without the risks of futures contracts.  The iPath DJ-UBS Cocoa ETN (NIB), iPath DJ-UBS Coffee ETN (JO), and iPath DJ-UBS Cotton ETN (BAL) are all efficient ways to profit from market swings.

But just remember…

Timing is everything when it comes to commodity investing.  So stay tuned to Commodity Trading Research for continued insight on when to pull the trigger!

Until Next Time,

Justin Bennett

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Category: 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.