Futures File

September 19, 2014

Cocoa Heats Up on Ebola Threat

Although most commodities markets fell this week, cocoa rallied sharply on fears that the Ebola epidemic could hamper production in West Africa.

The world’s cocoa production is heavily concentrated, with over half of the supply coming from just two nations, Ivory Coast and Ghana. Although neither nation has had a reported case of Ebola, Ivory Coast shares a border with both Liberia and Guinea, which are two of the hardest-hit nations in the current outbreak. If the disease were to spread, there could be economic and social unrest that would restrict the production of cocoa, which has caused the market to hit a one-month high Friday at $3270 per metric ton.

Longer term, it is still expected that there will be a worldwide surplus of cocoa this year, meaning that prices could subside if fears do as well.


Buck Reigns Supreme

Metals, grains, foreign currencies, and diesel fuel fell on their face this week as the value of the US dollar continued to rise. The greenback gained in response to announcements from US Federal Reserve Bank indicating a stable or strengthening US economy and higher interest rates to come. Meanwhile, many other major economies, including Europe, Japan, China, Russia, and Argentina are faltering, which has been hurting the value of their currencies.

As investors flocked toward dollar-denominated investments, the Dow Jones, S&P 500, and NASDQ stock index futures all made new highs. Meanwhile, the Euro currency dropped hard, while the Japanese yen plummeted to a new six-year low, and the Russian ruble collapsed to an all-time low.

Grain prices, already under severe pressure from huge crop prospects, continued their dive as a higher dollar makes our exports more expensive to our overseas customers, hurting demand. Meanwhile, precious metal investors dumped gold and silver as higher US interest rates could make metals more expensive to own.


Kingdom Stays United, Pound Rebounds

Thursday’s referendum in Scotland revealed that 54 percent of Scots desire to remain part of the United Kingdom, which boosted the British pound. In recent weeks, the pound fell on fears that Scotland might end its 300-year union with England, which could have caused a financial tailspin.

As votes were being counted, it became apparent that the nations were staying together, which elicited a rapid upward move higher in the pound, which hit $1.65 early Friday morning.

For over 18 years, Walt taught his method of trading at Purdue University. His comments on the markets have been featured in USA Today and other national outlets.

Walt's weekly commentary has been published for over 20 years. Futures File, written on Fridays for Saturday publication, provides a brief summary of commodity futures market highlights for the week.