New York Cocoa
End-of-day quote - 10/17
2064
+0.98%

If the Chinese consumed more...

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01/03/2013 | 11:47 am
Opinion : Bullish above 2180 
Target price : 2600 
Stop loss: 2130 
Third largest market after sugar and coffee, cocoa is traded on the futures markets in New York and London.

World production of cocoa beans comes from 70% of West Africa, mostly from Ivory Coast and Ghana, the two countries providing more than half of the 4 million tons of beans produced annually worldwide. The additional crops are 16% in Latin America (Brazil, Ecuador) and 14% in Asia-Pacific (Indonesia). Except for Brazil, which is characterized as both primary producer and biggest consumer, most of the products are subject to export intense form of unprocessed beans.

Prices may know upward acceleration due to political problems in some countries (such as Ivory Coast in January 2011). The fall was violent with more than 40% decrease. The new tonnage during the degradation is mainly due to the ratio of the ICCO "International Cocoa Organization" which confirms an excess global production end 2012 faces a stagnant consumption.

Most of the consumption is in Europe and the United States. In France, the average annual consumption of cocoa in all its forms is more than 13.2 lbs per capita, while in China it is only 0.2 lb. One can imagine the tone of global demand if the Chinese want to quickly enjoy a little more chocolate! Over the next two decades, difficulties may come from the strong demand growth in emerging markets, while the offer from producing countries will struggle to keep pace. Involved, primarily, a lack of investment in recent years in West Africa, which leads to poor yields.

Technically, being back on the lower limit of USD 2180 per ton, and due to the sequence of bearish trading sessions, prices are now far from their moving averages. A return to this lower area could also correspond to an excessive oversold level. In consequence, investors could take a long position on this level to target the USD 2430. A stop loss should be set below USD 2150.
Patrick Rejaunier
Zonebourse.com 2017
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