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Cocoa Careens Lower

Posted Friday, November 11, 2011, at 3:02 PM

Chocoholics may be cheered by the fact that ever-tumultuous cocoa prices fell to 2-year lows this week. Concerns that slovenly economic growth in the U.S. and Europe may result in reduced luxury spending have hit cocoa prices especially hard this year. This week, March cocoa futures reached a low of $2,544 per ton -- the lowest price since June of 2009.

Despite calls for a diminished appetite in the developed world, demand for cocoa in China and India is surging, where a burgeoning middle class has cultivated a sweet tooth. If the global economy rebounds strongly, chocolatiers may yet feel the crunch of rising prices.

Soybeans Slump

Farmers across the Midwest saw their profit margins shrink this week as grain prices fell, led lower by soybeans. November soybeans fell to the lowest price of the year on Thursday, closing at $11.58 per bushel. This represents more than a $3.00 per bushel drop from the high of $14.65 made at the end of August - a decline of over 20 percent.

The recent selloff was prompted by a USDA report projecting less demand for U.S. soybeans during the next year as well as increased competition from Brazilian and Argentinean soybean producers. The U.S. is still the world's largest producer of soybeans, growing over 3 billion bushels each year - 36 percent of the world total. Over the last decade, Brazil and Argentina have increased their soybean production rapidly, now producing a combined 45 percent of global production.

In the coming months, soybean prices will be affected by a myriad of factors, including Chinese demand, U.S. livestock production, South American growing weather, as well as demand for soy-based biofuels. As of midday Friday, soybeans for November delivery were trading at $11.65 per bushel.

Gold Grinds Higher

Gold prices continued their upward climb this week, hitting $1,804 an ounce on Tuesday morning. Gold has been working steadily higher over the last six weeks, gaining ground as global investors remain unsure about the European debt crisis and the U.S. fiscal future. With little hope for a quick resolution to the budget crises, "gold bugs" believe that governments may turn to inflationary measures in order to work their way out of debt.



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Commodity Futures File
Alex Breitinger
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Alex Breitinger, a 2009 graduate of DePauw University, is a commodity futures broker with Breitinger & Sons, LLC in Valparaiso. He can be reached at 800-411-FUTURES (3888) or online at www.indianafutures.com.
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