Traverse City Record-Eagle


January 4, 2014

Futures File: Cocoa, coffee lose steam; crude oil takes dip

Despite the blisteringly cold weather throughout much of the country, two of America’s favorite hot drinks aren’t seeing price increases. Cocoa and coffee prices both fell hard this week, primarily due to healthy harvests in tropical countries.

Nearly 70% of the world’s cocoa is produced in West African nations, where harvests are in full swing, helping to lower prices for chocoholics. Meanwhile, healthy coffee harvests in Brazil and Colombia are helping to bump global coffee production by nearly 8% this year.

Longer-term, the supply situation for cocoa appears tighter than that of coffee. Global demand for cocoa is expected to outpace supply by 70,000 metric tons this year, while inventories of coffee are expected to be the highest in over five years.

As of midday Friday cocoa for delivery in March stood at $2,700 per metric ton, while March coffee was worth $1.15 per pound.

Small Cattle Herd, Record Price

Cattle futures rose to an all-time record high on Friday, pushing near $1.36 per pound. The rally came on the heels of a USDA report projecting that US beef output may decline to the lowest level in over 20 years.

Recent droughts in cattle-producing states destroyed pastureland, limiting ranchers’ ability to sustain their animals. Meanwhile, high corn prices over the last two years also hurt profitability, which caused many to reduce their herd sizes. As a result, the total size of the U.S. herd is the smallest since 1952.

The winter storms across the U.S. are also limiting cattle shipments and making it difficult for the animals to gain weight, providing a short-term threat to the beef supply.

Crude Oil Dips

Crude oil prices dropped sharply this week, falling to a one-month low on Friday.

Crude oil production continues to rise in the United States due to the boom of shale oil drilling. Meanwhile, Russia recently announced that its production was rising as well, pushing that nation to the highest level since the Soviet Union broke up in 1991.

Rising global supplies, news of a slowing Chinese economy, and the prospect for reduced economic stimulus in the United States all weighed on crude, pulling prices as low as $94.32 per barrel on Friday.

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at (800) 411-3888 or This is not a solicitation of any order to buy or sell any market.

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