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International Cocoa Organization has admitted that the global cocoa shortage will be significantly larger than expected

The International Cocoa Organization has admitted that the global cocoa shortage will be significantly larger than previously forecasted. Cocoa prices in New York have rebounded in recent weeks, inching above the $9,330 per ton mark to close the week. 

First reported by Bloomberg, ICCO forecasted demand will exceed production by 439,000 tons, driven mainly by higher cocoa grinding in consuming countries. This is the second estimate for the current October-September year and is much larger than the February forecast for a deficit of 374,000 tons. 

“Currently available data reveal that cocoa grinding activities have so far been unrelenting in importing countries despite the record cocoa price rallies,” the ICCO, adding, “As the 2023-24 season progresses, it is certain the season will end in a higher deficit than previously expected.”

After the ‘great cocoa’ run-up in New York in the first 3.5 months of the year, through the first half of April, from $4,000 a ton to over $12,000 (a record high), prices crashed into May, down 44%. But in the last nine trading sessions, prices have surged to $9,330, or about 39%. 

The ICCO has increased its estimate for global cocoa grindings to 4.86 million tons, up from the initial forecast of 4.78 million tons, and increased its production projection by 12,000 tons to 4.46 million tons.

The revised forecast has likely captured the attention of Andurand Capital Management’s Pierre Andurand, who has been bullish on cocoa prices this year. 

Earlier this month, Andurand joined Bloomberg’s Odd Lots hosts Tracy Alloway and Joe Weisenthal to discuss the cocoa trade. 

Weisenthal asked the hedge fund manager: 

So what did your analyst see? Or how was your analyst able to see something in the supply and demand situation that he felt, and you felt, was not being identified by the analysts who cover this closely?

Andurand responded:

I think it’s mainly an understanding of how much prices have to move to balance the market. You know, sometimes people can trade that market for like 20 years. They’ve been used to a range of prices and they believe, okay, the top of the range is the high price for example.

But they don’t really ask themselves what makes that price, right?. And sometimes taking a step back can help. I mean what makes the price is mainly the fact that in the past you would have the supply response if prices were going up. But if now you don’t get the supply response, or the supply response takes four or five years, then you need to have a demand response.

And a lot of people look at prices in nominal terms. So you hear people saying ‘Oh, we are at all time high prices in cocoa, but that’s because they look at prices in nominal terms. [The] previous high in 1977 was $5,500 something dollars a ton of 1977 dollars, which is equivalent to $28,000 a ton of today’s dollars.

So we are still very far from previous highs. And so you have to look at a bit more history and understand in the past how prices reacted to a shortage, how long it took to recover the product shortage to actually solve itself. And what’s different today.

So there’s a ratio that we look at that most people look at, it’s actually the inventory to grindings ratio. So it’s a measure of inventory to demand, what we call grinding is basically industrial companies that take the cocoa beans and they want to make chocolate with it. So it’s a process and some of them make the end product chocolate directly. Some of them sell back the product to other chocolate makers.

And so basically a typical grinder would take cocoa beans and make cocoa butter and powder with it. And the prices of both those elements also went up even more than cocoa beans, which means that actually we probably had some destocking everywhere in the chain.

So it looks like demand, when we look at the chocolate makers, the end demand for chocolate didn’t go down at all, it looks to be flat on the year. Grindings look to be down three, three and half percent this year, despite the fact that the end demand is the same in volume, which means that they’ve been destocking cocoa beans actually.

And so we had destocking everywhere — at the end chocolate level, at the cocoa beans, at the cocoa butter and cocoa powder level. So we had this destocking everywhere on the chain and now we have the largest deficit ever on top of two previous years of deficit. And it looks like next year we will have a deficit.

So we’re in a situation where we might actually run out of inventories completely. I mean this year we think we will end up with an inventory to grinding ratio — so inventory at the end of the season — of 21%. For the last 10 years we’ve been between 35% and 40% roughly. At the previous peak in 1977 we were at 19% and that’s what drove us to $28,000 a ton, of todays’s dollars.

If we have another deficit next year, then we might go down to 13%. So I don’t think it’s actually possible. That’s when you really have real shortage of cocoa beans, you can’t get it and that’s when the price can really explode. And so understanding that you have to slow down demand and we know that demand can’t really be slowed.

So that’s when you can have an explosion [in price]. And remember that these commodity futures, you need to have, they’re actually physically settled. So if somebody wants to take delivery, they have to converge with the price of the physical. If you have no physical, somebody wants to take delivery, the price can go anywhere.

So it’s a dangerous commodity too short, right? If you have no physical against it. And actually sometimes we read news that the funds have been pushing cocoa prices. It’s actually completely untrue because the funds have been selling since February. They actually went from a length of 175,000 lots, so that’s 1.75 million tons of cocoa lengths, I think it was around like September last year in average, or a bit earlier, to 28,000 lots to 280,000 tons at the moment.

So they sold more than 80% of their length actually. And the people who’ve been buying the futures from the funds, it’s producers because they’re producing a lot less than they expected.

So what has been happening in the cocoa market is that you had a reduction of what we call the open interest, where both the longs would use their length and the shorts would use their shorts. And then we get into a market where you have less liquidity because you have less exposure, you have less longs and less shorts, and then the volatility increases.

So in the past when people were comfortable being, let’s say, having a 100 lots position now because it moves more than 10 times more than in the past, we’re going to have like a 10 lots position, right? So the market became more — due to the fact that we had a massive move and we have a massive deficit, so everybody’s reducing their positions and because of the increased volatility, we have less activity. And that’s what makes the point more volatile as well.

Andurand reaffirmed his $20,000 price target for later this year or next year… 

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The movement’s forces struck ships in the Red Sea, the Arabian Sea and the Indian Ocean that “belong to companies that violated the decision to ban passage to [Israeli] ports.”

Yemen’s Ansar Allah movement, also known as Houthis, attacked a US aircraft carrier, destroyer and a number of ships in the Red Sea, Houthi military spokesman Yahya Saree said.

The Houthi navy, missile units and drones have conducted six operations, the spokesman said.

“The US aircraft carrier Dwight Eisenhower was attacked in the northern Red Sea with several missiles and drones,” Saree said, adding that a US destroyer was also attacked in the Red Sea.

The movement’s forces struck ships in the Red Sea, the Arabian Sea and the Indian Ocean that “belong to companies that violated the decision to ban passage to [Israeli] ports,” the spokesman added.

The US Central Command (CENTCOM) said in a statement that it had shot down one Houthi uncrewed aerial system and two anti-ship ballistic missiles in the southern Red Sea that had been fired in the direction of USS Gravely destroyer and were destroyed in “self-defense.”

Houthis vowed in November 2023 to attack any ships associated with Israel until it halts military actions in the Gaza Strip. Amid the Houthi attacks, some companies suspended shipments through the Red Sea. The attacks prompted the United States to form a multinational coalition, which includes the United Kingdom among others, to protect shipping in the area of the Red Sea, as well as to strike Houthi targets on the ground.

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Could Appalachia be primed for revitalization trends and capitalize off decarbonizing trends?

America’s transition to a decarbonized economy demands massive base metals and rare Earth minerals. Currently, China dominates the rare Earth mineral market. However, initiatives are already underway by the US federal government to sever reliance on the Chicoms and boost domestic mining and refining abilities. 

One unlikely area where 40% of the nation’s lithium supply could be sourced from is ‘Trump’s coal country,’ otherwise known as good ole’ Appalachia. 

According to Justin Mackey, a research scientist at the National Energy Technology Laboratory and PhD student at the University of Pittsburgh, wastewater from oil/gas rigs across the Marcellus Shale formation could supply the nation with 40% of its lithium needs. 

“This is lithium concentrations that already exist at the surface in some capacity in Pennsylvania, and we found that there was sufficient lithium in the waters to supply somewhere between 30 and 40 percent of the current US national demand,” Mackey told CBS News. 

Mackey said there are lithium mining operations in the US. But he told local media outlet Pittwire, “This is different. This is a waste stream, and we’re looking at a beneficial use of that waste.” 

He said finding lithium in water recycled in hydraulic fracking wasn’t difficult, adding, “If you can extract value out of materials, and specifically lithium from this, then you reduce the cost of remediating and handling this waste.” 

The researcher said future wastewater extractions of lithium from oil/gas rigs in neighboring states, such as West Virginia, Western Maryland, and Ohio, could spark an “economic boom for the region.”

Trump country has been economically decimated over the last several decades amid de-industrial trends. Death and despair, along with big pharma, helped ignite an opioid and pill epidemic that has killed tens of thousands, if not more. 

Could Trump’s coal country be primed for revitalization trends and capitalize off decarbonizing trends? If so, then the land across the region could become increasingly more valuable over the coming decade.

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The ruling African National Congress has secured 40.2% of the vote in the latest general election, 17% less than in 2019

The African National Congress (ANC) has failed to garner a majority in South Africa’s general election for the first time in 30 years. The ANC secured only 40.2% of the vote, mandating coalition negotiations. Nelson Mandela led the party to power in 1994 during the nation’s first democratic elections after the fall of Apartheid. 

Polling stations opened their doors on Wednesday, with 28 million voters eligible to elect new members of the National Assembly, as well as regional parliaments. More than 50 parties were vying for power, including a significant number of new contenders.

With ballot-counting completed in 99.9% of all voting districts, the ANC leads the pack with 40.21% of the vote, followed by opposition centrist Democratic Alliance party with 21.76%, and left-wing uMkhonto weSizwe at 14.59% of the vote.

The ANC’s result marks a 17-percentage point decline compared to their showing in the 2019 vote.

A spokesperson for the Electoral Commission said final results would be declared on Sunday evening. According to South Africa’s constitution, the new parliament must convene within two weeks and elect a new president.

The party’s first deputy secretary general, Nomvula Mokonyane has stated that the ANC is “talking to everyone” regarding a possible coalition, with the party leadership expected to set red lines for negotiations “at an appropriate time.”

Several media outlets have claimed in recent days that ANC leader and South African President Cyril Ramaphosa could face pressure to step down if the party fails to garner more than 45% of the vote. However, ANC representatives have denied those rumors.

The opposition has criticized the ANC for over what it says is a failure to deliver on its “better life for all” promise, citing persistent crime, poverty and high unemployment rates.

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Robert De Niro Runs From Angry New Yorkers

The Bezos Earth Fund has committed $100 million to transform food production and agriculture

Amazon founder Jeff Bezos has donated $30 million to fund a research center for manufacturing “sustainable proteins” like lab-grown meat.

The Bezos Center for Sustainable Protein opened its doors at North Carolina State University on Friday, with the help of a substantial grant from the $10-billion Bezos Earth Fund.

The Center, which is intended to be a “biomanufacturing hub for dietary proteins that are environmentally friendly, healthy, tasty, and affordable,” will focus on researching and commercializing technologies like cell-cultured meat—a.k.a. lab-grown meat—and precision fermentation, which uses processes similar to the manufacture of beer to grown proteins and other products.

The Bezos Earth Fund has earmarked $100 million for a network of research centers dedicated to research into “sustainable proteins,” as part of a broader $1 billion committed to transform food production and agriculture.

“Food production is the second largest source of greenhouse gas emissions, so it’s critical we find ways to feed a growing population without degrading the planet,” said Andrew Steer, President and CEO of the Earth Fund in a statement.

The opening of the Bezos Center comes hot on the heels of two state-wide bans on the production and sale of lab-grown meat. Alabama and Florida have now both enacted bans into law.

“What we’re protecting here is the industry against acts of man, against an ideological agenda that wants to finger agriculture as the problem, that uses things like raising cattle as destroying our climate,” Florida Governor Ron DeSantis said, after signing his state’s bill.

“This will be people who will lecture the rest of us about things like global warming, they will say you can’t drive an internal combustion vehicle, they will say agriculture is bad, meanwhile, they’re flying to Davos in their private jets.”

Arizona and Tennessee are also considering similar legislation at the present.

As well as these state-level bans, there are regulations at the federal and state level preventing manufacturers of lab-grown meat from calling their products “meat” and requiring them to label their products as “lab-grown.”

Despite its status as an official “food of the future,” lab-grown meat has been dogged by persistent scandals and suggestions that the product will fail to live up to its hype, may not be scalable and could even be significantly worse for the environment than the animal products it is intended to replace.

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