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🔥 Buying Chocolate: This Cocoa Rally Isn’t Stopping
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While the market is nervous about oil prices and worries about the fate of the dollar, a great trend is moving very close, on which less ambitious players are making money. Cocoa futures have brought a 40% yield on long positions this year alone, and the market does not intend to stop at this level.
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The Cocoa Wizard, which turns coffee into mochas and creates a huge range of goodies from chocolate to ice cream and cakes, has been growing in New York futures trading for a year now. In Tuesday's session on ICE Futures US, a tonne of cocoa for December delivery hit a new high of $3,697. In 12 months, the chocolate rally returned 56%.
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Usually, the price of cocoa beans rises sharply around the holidays, when sweet gifts become too popular, as well as the problem of bad weather affecting the harvest.
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Both factors are relevant now: after the pandemic, there has been a boom in chocolate consumption, and even regions that were not traditional buyers of cocoa have now become active consumers. For example, China imported more than $648 million worth of chocolate products in 2022 (12th place in the world ranking of importers).
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In the case of La Nina, the cooling of the Pacific Ocean and the resultant too-wet weather caused the rotting and disease of cocoa trees in the leading producing countries in West Africa.
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Ultimately, the huge premium for these raw materials will make everyone pay more for their favourite treats.
Starbucks (NASDAQ: SBUX) has already raised menu prices by 5-7% year-over-year.
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Now the optimal pivot point is visible in the $3820/50 zone, so there is still upside potential. Technically, the cocoa market already looks overbought – on a short-term correction it may fall to $3300-3000, but the upward trend will remain relevant at least until the first quarter of next year. Draw your conclusions!
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Profits to y’all!