The little secret among commodity investors: its the “other” commodities where the real money is made. Oil, Gold, and Silver are not the only commodities making the big gains due to supply interruptions. There are other commodities spiking up as interruptions in the Middle East and Africa interrupt sensitive supplies.
Among these commodities facing possible supplies issues is cocoa. Recent events in the Ivory Coast have sent the price of Cocoa to multi decade highs. There is a ban on Cocoa exports which was extended until March 15 which has turned the country upside down. Although there are rumors that Ivory Coast farmers are shipping there goods through neighboring countries, supplies are still playing a major role in the price of Cocoa. Some analysts are expecting Cocoa prices to top $3,700 a ton:
“Despite favorable weather and attractive prices, the short-term outlook for cocoa supplies out of Ivory Coast has turned sharply negative,”Kona Haque, a commodity analyst with Macquarie
Other people are commenting on the situation:
“The extended ban is likely to put greater pressure on the small farmers who grow most of the cocoa beans. The flow of beans from the countryside to the ports will slow, resulting in quality problems and “severe social consequences for the rural communities,” said Rodger Wegner, managing director of the German Cocoa Trade Association.
The situation appears to be getting worse as the country’s president is now threatening of seizing cocoa stocks if farmers do not comply with the ban.
Cocoa ETF
Historically, Cocoa has never received so much media attention. It is a commodity that usually has more than enough supply, but recent events has changed that perception at least in the near term. Thus, there doesn’t exist many ETF options to play the commodity. There is one Cocoa Exchange Traded Nore or (ETN) that invests in futures contracts (please do research into futures prior to investing). The other option would be to invest in country or regional ETFs of the largest producers of cocoa. Most of the Cocoa producing countries lie near the equator and thus the list is dominated by African/Latin American and some Asian countries.
Top Cocoa Producing Countries (source)
- Ivory Coast
- Indonesia
- Ghana
- Nigeria
- Brazil
iPath Dow-Jones UBS Cocoa Subindex Total Return Index (NIB)
The Dow Jones-UBS Cocoa Subindex Total ReturnSM is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnSM and is intended to reflect the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index as well as the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The Dow Jones-UBS Cocoa Subindex Total ReturnSM is a single-commodity sub-index currently consisting of one futures contract on the commodity of cocoa, which is included in the Dow Jones-UBS Commodity Index Total ReturnSM.
Related posts:
March 9, 2011
Commodity ETFs