Author: Dailyfutures.com - October 8, 2001

Article:
While it has been hard to find a commodity in an uptrend lately,
there is a new name on the list that may be due for higher
prices. Just this month, cocoa broke above its four-year
downtrend and appears to be holding its gains despite a slower
outlook for the world economy.

Why are cocoa prices rising? There's a saying that the best
cure for low prices is low prices and that is probably the best
explanation for the cocoa market. Poor prices over the past two
years have slowed efforts to expand production and discouraged
farmers from the use of fertilizers and pesticides, resulting in
a smaller harvest in the 2000-2001 season. World demand, in the
meantime, has grown steadily, surpassing 3 million metric tons.
The result is that ending stocks have fallen and are expected to
fall more in the upcoming season. Some analysts are looking for
the 2001-2002 stocks to use ratio to end up in the low 30's
which would be the leanest situation since 1987.

Chocolate, most likely, will continue to see growing consumer
demand with an improving world economy. The problem for this
market will continue to be that Indonesia, Ghana, and Nigeria
are too eager to expand production when prices are profitable.
These governments, along with the Ivory Coast, need to reassess
their production incentives to keep their markets more
profitable. Even so, this appears to be one of those small
windows of opportunity when cocoa prices have a chance to head
higher. As always, there are no guarantees.

Dailyfutures.com. October 8, 2001.

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