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I really must confess I am a bit ashamed of myself. A large part of my job is to stay abreast of trends in the commodity and financial world and then to bring that information to you in an effort to help you prepare and hedge against unwanted or wanted swings in prices ideally in advance of them occurring. Granted, a tall task at times and there are instances where important new has slipped past unnoticed and I have unfortunately uncovered just such an event. It turns out there has been another El Nino related disruption in a commodity and the impact and news could not have come at a worse time. Evidently the heat and lack of rainfall in key growing areas this past year created a shortfall in cocoa bean production and prices for the key ingredients for making chocolate has been on the rise. The three key ingredients that make up the “milk chocolate index” (I bet you did not know there was such a thing) cocoa powder, cocoa butter and sugar are up over a year ago 26%, 19%, and 15% respectively. I am almost surprised there have not been protests on the streets demanding that the government do something about the runaway chocolate prices as if not stopped only that exclusive 1% of the population will be able to enjoy this delectable and much sought after treat. Think of the horror on the faces of children and adults alike when they awaken on Easter Morning to find nothing but those disgusting “peeps” left behind in their baskets!! There is one possible saving grace in all of this which has kept the overall prices for chocolate from reaching into the stratosphere and that is demand. At first blush, you might think that means that higher prices have curtailed the usage but it is slightly more basic than that as it turns out most chocolate is consumed in colder climates and the generally warm winter that we have experienced in much of the Northern Hemisphere has been curtailing demand. For example, in Germany, sales for chocolate bunnies is already predicted to be down 6% this year. Phew!! It would appear that the possible tragedy that the warmer than normal El Nino conditions created may have also helped avert a panic.
Both commodity and equity markets are sagging a bit here as this week has drawn on, part of which can be attributed to the extended upcoming Easter weekend. Of course markets are always trolling for fresh news and sometimes that lays right on the surface while at others they need to sink the lure a bit deeper to catch much of anything. When the news is sparse like it is right now, it seems at times we rehash older stories but somehow put a different spin on it comparatively which would seem to be the case we have currently. Think back of a week ago after the Fed meeting and the forward guidance that rate hikes would be less aggressive than promised back in December, which the market interpreted as bearish dollar and bullish commodities. Well, that was last week and this week the interpretation seems to be that some of the Fed policy makers are making hawkish rumbles and there is still the possibility for a 25 basis point hike this year and as such, it is bullish dollar and bearish commodities. I personally failed to see the major change in the outlook or at least interpretation of the Fed-speak in the last week but who am I to stand in the way of the next trade. As an old client used to be fond of saying, “well, I am off to do something, even if it is wrong.”
With the exception of wheat, exports sales backed off this past week. For corn, we sold 803,200 MT or 31.63 million bushels. This is still not a bad number but was 35% lower than last week and 27% below the 4-week average. Top sales went to Japan with 350.4k MT, Colombia taking 142.1k and Saudi Arabia with 73.7k. Marketing year to date we have now sold 1.215 billion bushels, which is 74% of the USDA target. With 23 weeks remaining in the year this means we will need to average 18.1 million in sales each week. Note that another 260k MT of corn sales to Taiwan has been announced this morning. I would not necessarily call bean sales poor either but at 410,800 MT or 15.09 million bushels, we were 34% below the previous week and 5% under the 4-week average. Top sales went to Mexico with 154.3k MT, followed by unknown destinations with 84.9k and Bangladesh with 53.1k. Year to date we have now sold 1.61 billion bushels, which is 95.3% of the USDA projection. As I commented initially, wheat was a minor bright spot for last week as we sold 368,900 MT or 13.55 million bushels. This was 73% above last week and 16% above the 4-week average. In fact, I believe this was the 8th highest weekly sale for the marketing year. The top sales went to the Philippines with 107.3k MT, followed by Thailand with 57.9k and then Yemen who purchased 50k. Year to date we have now sold 695.9 million bushels representing 90% of the USDA target with 10-weeks left to go.
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