Cocoa is trading in rarefied air

It was 9 years when the price of Cocoa last registered a Monthly overbought reading.

This is the 5th time this has occurred over the past 45 years.

While Cocoa also appears in my recent edition of Macro Extremes which observes ‘weekly’ timelines, this Monthly moment is something to note.

Macro Extremes (week ending June 9, 2023)

This doesn’t mean speculators necessarily initiate ‘short’ positions but it should motivate growers and wholesalers to lock in forward pricing and it’s a warning flag for long side momentum traders and industry buyers.

But when such an event occurs, it soon after bodes well for the accumulation of securities in those who make chocolate such as Nestle, Barry Callebaut and Lindt & Sprungli.

Inversely, you’d think that the rising price of Cocoa would crimp the margins of confectioners and it may have, although higher costs (aided by shrinkflation) do get passed on.

After all, chocolate is an addition.

At such a juncture, investors and companies now begin to anticipate that the cost of such a major input will peak.

Incidentally, 6 weeks ago, I wrote this note about Sugar (the other major input) which was/is also trading at simultaneous weekly and monthly extremes.

Too much sugar is bad for you

June 12, 2023

by Rob Zdravevski

rob@karriasset.com.au