Chart of the Week: Cocoa Craziness

With Halloween just a week ago, and cocoa futures having sold off some since mid October after an impressive run – we can’t help but think of Homer Simpson and his infamous pumpkin bet:

Lenny: Hey, Homer! How come you’ve got money to burn? Or singe, anyway?

Carl: Yeah, Homer, what’s your secret investment?

Homer: Take a guess.

Barney: Uh, pumpkins?

Homer: [pause] Yeah, that’s right, Barney. This year, I invested in pumpkins. They’ve been going up the whole month of October and I got a feeling they’re going to peak right around January. Then, bang! That’s when I’ll cash in.

A few weeks later:

Broker: Homer, you knuckle-beak, I told you a hundred times: you’ve got to sell your pumpkin futures before Hallowe’en! Before!

Homer: All right, let’s not panic: I’ll make the money back by selling one of my livers. I can get by with one.

So what’s got into Cocoa? Outside of stock index futures, Cocoa holds the title for largest market gain so far this year up 19.8% {disclaimer: past performance is not necessarily indicative of future results}. Was it complete candy bar madness for Halloween? Are Chocolate lovers everywhere crowding the doors of every chocolate store, running to the shelves to get as much as chocolate as possible for the holiday season like the people rushing into Target the day after Thanksgiving?

CocoaChart Courtesy: Finviz.com
Disclaimer: Past performance is not necessarily indicative of future results)

No, according to our friends at RJO Futures, via the Wall Street Journal – it’s the wet weather in Indonesia and dry weather in Africa that might cause black pod disease (speaking of spooky Haloween stuff…)

“In Indonesia, they’re getting slammed with rain,” said Hector Galvan, senior broker at RJO Futures in Chicago. “Analysts are projecting black pod disease,” which rots cocoa pods, will become an issue.

… traders { are}worried that dry weather during the main-development period of the crop in West Africa may have hurt the quantity and quality of the beans coming out of that region, which produces about 70% of the world’s cocoa.”

So is your Snickers bar going to cost $20 – not quite yet… if we take a look at the larger picture, we see Cocoa is just returning to its 2012 numbers (and nowhere near its 2011 highs).  Oh, Homer’s broker may want to port his advice from pumpkins over to Cocoa also – as it also looks like Cocoa has sold off following October in 2011 and 2012.

long term CocoaChart Courtesy: Finviz.com
(Disclaimer: Past performance is not necessarily indicative of future results)

Write a Comment

The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.