Fight off the cold with hot chocolate!
The export of cocoa beans has been struggling as of late with the biggest nation producer, Côte d'Ivoire, seeing a dock workers strike. Dock workers operating at the country’s two main ports of Abidjan and San Pedro fought a two-week fight for an increase in pay. More precisely, from 30 CFA francs to 105 CFA francs per bag. The dockers eventually gained a partial victory, increasing their pay to an undisclosed amount above 50 CFA francs per bag. The strike saw the cocoa futures price spike momentarily before settling to pre-strike levels again.
The strike
coincides with the onset of the main crop season for cocoa beans, ranging from
October to the end of March. Côte
d'Ivoire, together with Ghana, make up over 60 % of the global cocoa bean
production, with the two neighbouring countries being similar in terms of
climate and environment. Cocoa beans, like most agriculture, depend to a
significant extent on the weather, and the weather has been conducive to good
yields during the main crop season. A healthy amount of rain during the rainy
season spanning April to November has entailed sufficient moisture in the soil
for the drier and sunnier weather present at year-end.
Heavy
precipitation is however also associated with black pod disease, a protozoal
disease that can destroy the cocoa trees’ fruits. The heavier-than-expected
downpour brought with it an outbreak of the disease, as excess moisture boosts
the infectivity of the pathogen’s spores. The impact on yields and subsequent
supply available for export will be more apparent as we move further into the
crop season, as it is yet too early to tell how much has been infected.
With prices
settling thanks to the strike ending, the supply is deemed to be sufficient
enough to meet the current expected demand. But the question remains whether
markets have accounted for the possibility of a more significant supply disruption
in the future, possibly owing to the fungal disease. Combining the above with
the rising fertilizer prices and cocoa prices might be poised for a rally.
Cocoa Futures Mar23 (USD/metric tonne), daily one-year price chart
Bull & Bear-Certificates
Cocoa Futures Mar23 (USD/metric tonne), daily six-month price chart
Cocoa Futures (USD/metric tonne), weekly five year price chart
The full name for abbreviations used in the previous text:
EMA 9: 9-day exponential moving average
Fibonacci: There are several Fibonacci lines used in technical analysis.
Fibonacci numbers are a sequence of numbers in which each successive number is
the sum of the two previous numbers.
MA20: 20-day moving average
MA50: 50-day moving average
MA100: 100-day moving average
MA200: 200-day moving average
MACD: Moving average convergence divergence
Risks
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