5 ms·

Cocoa surpasses $10k a tonne as shortages squeeze 'out of control' market

17 points by prmph 3y ago

ramesh31 3y ago
Does this mean some poor farmer somewhere is seeing a windfall? Or is it literally just corporate price fixing like everything else now.
- vladsanchez 3y ago
  100% the Latter.
  - landonia 3y ago
    Most definitely. I wish I could foresee a time when the people growing the crop are the ones who mainly benefit from it. But, I doubt it.
    - ars 3y ago
      In the US that's exactly the case. The difference? The ability to view and interact with the commodities and insurance markets. > I wish No need to wish, instead give farmers cell phones, commodities trading websites localized to their language, and bank accounts.
      - mrguyorama 3y ago
        No actually, the vast majority of those farmers got priced out of the business, or "outcompeted", or aggressively bought by a megacorp farm. Very few family farms still exist. I know one from northern Maine, and they sure as hell don't seem to do better when potato prices go up, because well, they don't have any potatoes to sell when potato prices are up, because potato prices are up when they don't have any potatoes to sell!
      - reaperman 3y ago
        > In the US that's exactly the case > No need to wish, instead give farmers cell phones The people doing the farming in the USA are rarely the people who make money from the farms. Some people like to throw out the fact that almost 90% of farms in America are small (<$350,000/year) family-owned and operated farms. But that 90% of farms accounts for only 20% of total farm production, and over 90% of their household-income came from non-farming activities (spouse working other job = 90% of household income for small farms). The ~5% of farms which are the largest farms account for about 60% of gross farm production in the USA. These few farms employ about 2 million hired farmhand laborers - generally you won't see the farm owners doing fieldwork.
        pasttense01 3y ago
        It depends on the crop. Corn and soybeans are massively mechanized so you need very little labor so often it is the farm owners doing the fieldwork.
        reaperman 3y ago
        Iowa is seeing a “disappearing middle” due to farm consolidation - small farms are staying about the same but the largest farms are growing in size by eating medium sized farms. Currently 50% of Iowa farmland is owned by the 8.7% of farms that are large enough it would take between 20 days to 6 months to harvest with a single combine (the 200 very largest farms are 7700 acres on average, a combine harvests 50-75 acres of corn per day). Some of these farms you’d likely want 10+ combines to harvest corn in the peak window. So these farms are looking at $10-100 million in farmland alone, and another $1-10 million in combines. An acre of Iowa cornfield costs $11,400 and yields $170-350 profit per acre depending on the year. Profits are on the low end right now. So the smaller “large farms” that start at 1,000 acres would be expected to earn a profit of $170,000-350,000 per year on $10 million of land. https://www.thegazette.com/agriculture/2022-ag-census-five-things-to-know-about-iowa/ https://www.thegazette.com/agriculture/2022-ag-census-five-t... https://www.nass.usda.gov/Publications/AgCensus/2022/Full_Report/Volume_1,_Chapter_1_State_Level/Iowa/st19_1_009_010.pdf https://www.nass.usda.gov/Publications/AgCensus/2022/Full_Re... https://www.farmprogress.com/crops/iowa-farm-margins-tighten https://www.farmprogress.com/crops/iowa-farm-margins-tighten
  - deleted 3y ago
    [deleted]
- ars 3y ago
  Not even corporate, this has the "smell" of traders messing with the market. But these kinds of things always collapse eventually. Go to: https://tradingeconomics.com/commodities https://tradingeconomics.com/commodities and randomly click on different Agricultural commodities, and switch to a 5 year view. So far every single one I looked at had spikes of this type. A lot of them were during COVID though, so maybe my argument isn't great. But a lot of them weren't. And to answer your question: The farmer will benefit at least somewhat because it means 100% of his crop can get easily sold because everyone is desperate for supply. He won't get the full amount of the rise, but some part will go to him. > some poor farmer somewhere is seeing a windfall? Think about what that would mean. To get such a windfall also means the farmer is completely exposed to the risk when the price goes down. Instead farmers will typically sell a year in advance, they won't get the rise, but they are also shielded from a fall. You can't have one without the other. One of the prime motivations for putting cell service in poor countries is to give farmers access to the commodities market. They can sell futures, backed by their crop, or buy crop insurance, etc. If you want to help a poor farmer that's probably the best thing you can do: Make a way for them to access, and interact, with the commodities market for what they grow.
  - prmph 3y ago
    The current shortages seem to be driven by lower production in West Africa [1] (which accounts for two-thirds of the global crop), not by speculation. The reasons for the lower production include drier weather due in part to climate change, a resurgence of the swollen-shoot disease that affects cocoa plants, and illegal mining affecting land on which cocoa is grown. [1]. https://www.fastcompany.com/91065690/cocoa-beans-production-supply-shortage-why https://www.fastcompany.com/91065690/cocoa-beans-production-...
  - zer8k 3y ago
    This is a lot of words to say you've never traded a commodity market. Blaming the liquidity providers while the fundamentals point to an exact reason cocoa is going nuts. Maybe do a little more than "clicking on random graphs" to find a spurious justification. Cocoa will go limit up until the situation in Africa improves. The "traders" don't move nearly the volume the large chocolate providers do. Are they also "manipulating" the market?
- reaperman 3y ago
  At face value, I believe this means that many farmers are getting no money, because they weren't able to grow their crop. Other farmers may get a bit of a windfall if they're in a market with a competitive supply chain. Other farmers may see no difference if there are just one or few buyers who can get their product to the global market (if no one else is offering the farmer more money, they might have to take what they can get). Usually reports on "prices paid to farmers" take longer to put together and publish. This was a recent spike in futures market prices, so it will be awhile before you can find reports on the effects on how much farmers are paid. But how much farmers are paid can still be a very regional thing, depending on logistics options available for getting the crop to market.
prmph 3y ago
The current shortages are driven by lower production in West Africa [1] (which accounts for two-thirds of the global crop), not by speculation. The reasons for the lower production include drier weather due in part to climate change, a resurgence of the swollen-shoot disease that affects cocoa plants, and illegal mining affecting land on which cocoa is grown. [1]. https://www.fastcompany.com/91065690/cocoa-beans-production-supply-shortage-why https://www.fastcompany.com/91065690/cocoa-beans-production-...
- 4gotunameagain 3y ago
  > drier weather due in part to climate change Climate change is definitely a thing, but you cannot know whether this dry streak is due to climate change.
  - jauntywundrkind 3y ago
    We don't have to flog this dead horse every time. Ok, fine. Maybe there's a 0.000001% chance this has nothing to do with climate change (caused by man made global warming at that) & is just a temporary aberration. It's only 99.99999% certain. Is that vanishingly impossible probability worth hopping in to defend? Is it? Do we have to suffer this, every time someone mentions climate change? Why be a denialist? What makes it worth considering this anti-stance for even a second? Why bank so much on the shadow of a doubt?
    - nathanaldensr 3y ago
      "Every news story that even remotely involves the weather is climate change." Well, except for 0.000001% of them.
    - pasttense01 3y ago
      Climate change shows its effects over decades--not over a year or two as has happened with cocoa.
      - defrost 3y ago
Zren 3y ago
LastWeekTonight w/ John Oliver did a segment on Chocolate 4 months ago btw. Cocoa production is definitely underpaid so it wouldn't be terrible for this higher price to stick. It's not like the chocolate companies will drop their prices after they mark them up for months. https://www.youtube.com/watch?v=FwHMDjc7qJ8 https://www.youtube.com/watch?v=FwHMDjc7qJ8
TacticalCoder 3y ago
I want to fix this injustice. How can I short cocoa?

17 points by prmph 3y ago

Does this mean some poor farmer somewhere is seeing a windfall? Or is it literally just corporate price fixing like everything else now.

vladsanchez 3y ago
100% the Latter.
- landonia 3y ago
  Most definitely. I wish I could foresee a time when the people growing the crop are the ones who mainly benefit from it. But, I doubt it.
  - ars 3y ago
    In the US that's exactly the case. The difference? The ability to view and interact with the commodities and insurance markets. > I wish No need to wish, instead give farmers cell phones, commodities trading websites localized to their language, and bank accounts.
    - mrguyorama 3y ago
      No actually, the vast majority of those farmers got priced out of the business, or "outcompeted", or aggressively bought by a megacorp farm. Very few family farms still exist. I know one from northern Maine, and they sure as hell don't seem to do better when potato prices go up, because well, they don't have any potatoes to sell when potato prices are up, because potato prices are up when they don't have any potatoes to sell!
    - reaperman 3y ago
      > In the US that's exactly the case > No need to wish, instead give farmers cell phones The people doing the farming in the USA are rarely the people who make money from the farms. Some people like to throw out the fact that almost 90% of farms in America are small (<$350,000/year) family-owned and operated farms. But that 90% of farms accounts for only 20% of total farm production, and over 90% of their household-income came from non-farming activities (spouse working other job = 90% of household income for small farms). The ~5% of farms which are the largest farms account for about 60% of gross farm production in the USA. These few farms employ about 2 million hired farmhand laborers - generally you won't see the farm owners doing fieldwork.
      - pasttense01 3y ago
        It depends on the crop. Corn and soybeans are massively mechanized so you need very little labor so often it is the farm owners doing the fieldwork.
        reaperman 3y ago
        Iowa is seeing a “disappearing middle” due to farm consolidation - small farms are staying about the same but the largest farms are growing in size by eating medium sized farms. Currently 50% of Iowa farmland is owned by the 8.7% of farms that are large enough it would take between 20 days to 6 months to harvest with a single combine (the 200 very largest farms are 7700 acres on average, a combine harvests 50-75 acres of corn per day). Some of these farms you’d likely want 10+ combines to harvest corn in the peak window. So these farms are looking at $10-100 million in farmland alone, and another $1-10 million in combines. An acre of Iowa cornfield costs $11,400 and yields $170-350 profit per acre depending on the year. Profits are on the low end right now. So the smaller “large farms” that start at 1,000 acres would be expected to earn a profit of $170,000-350,000 per year on $10 million of land. https://www.thegazette.com/agriculture/2022-ag-census-five-things-to-know-about-iowa/ https://www.thegazette.com/agriculture/2022-ag-census-five-t... https://www.nass.usda.gov/Publications/AgCensus/2022/Full_Report/Volume_1,_Chapter_1_State_Level/Iowa/st19_1_009_010.pdf https://www.nass.usda.gov/Publications/AgCensus/2022/Full_Re... https://www.farmprogress.com/crops/iowa-farm-margins-tighten https://www.farmprogress.com/crops/iowa-farm-margins-tighten
- deleted 3y ago
  [deleted]
ars 3y ago
Not even corporate, this has the "smell" of traders messing with the market. But these kinds of things always collapse eventually. Go to: https://tradingeconomics.com/commodities https://tradingeconomics.com/commodities and randomly click on different Agricultural commodities, and switch to a 5 year view. So far every single one I looked at had spikes of this type. A lot of them were during COVID though, so maybe my argument isn't great. But a lot of them weren't. And to answer your question: The farmer will benefit at least somewhat because it means 100% of his crop can get easily sold because everyone is desperate for supply. He won't get the full amount of the rise, but some part will go to him. > some poor farmer somewhere is seeing a windfall? Think about what that would mean. To get such a windfall also means the farmer is completely exposed to the risk when the price goes down. Instead farmers will typically sell a year in advance, they won't get the rise, but they are also shielded from a fall. You can't have one without the other. One of the prime motivations for putting cell service in poor countries is to give farmers access to the commodities market. They can sell futures, backed by their crop, or buy crop insurance, etc. If you want to help a poor farmer that's probably the best thing you can do: Make a way for them to access, and interact, with the commodities market for what they grow.
- prmph 3y ago
  The current shortages seem to be driven by lower production in West Africa [1] (which accounts for two-thirds of the global crop), not by speculation. The reasons for the lower production include drier weather due in part to climate change, a resurgence of the swollen-shoot disease that affects cocoa plants, and illegal mining affecting land on which cocoa is grown. [1]. https://www.fastcompany.com/91065690/cocoa-beans-production-supply-shortage-why https://www.fastcompany.com/91065690/cocoa-beans-production-...
- zer8k 3y ago
  This is a lot of words to say you've never traded a commodity market. Blaming the liquidity providers while the fundamentals point to an exact reason cocoa is going nuts. Maybe do a little more than "clicking on random graphs" to find a spurious justification. Cocoa will go limit up until the situation in Africa improves. The "traders" don't move nearly the volume the large chocolate providers do. Are they also "manipulating" the market?
reaperman 3y ago
At face value, I believe this means that many farmers are getting no money, because they weren't able to grow their crop. Other farmers may get a bit of a windfall if they're in a market with a competitive supply chain. Other farmers may see no difference if there are just one or few buyers who can get their product to the global market (if no one else is offering the farmer more money, they might have to take what they can get). Usually reports on "prices paid to farmers" take longer to put together and publish. This was a recent spike in futures market prices, so it will be awhile before you can find reports on the effects on how much farmers are paid. But how much farmers are paid can still be a very regional thing, depending on logistics options available for getting the crop to market.

prmph 3y ago

The current shortages are driven by lower production in West Africa [1] (which accounts for two-thirds of the global crop), not by speculation. The reasons for the lower production include drier weather due in part to climate change, a resurgence of the swollen-shoot disease that affects cocoa plants, and illegal mining affecting land on which cocoa is grown. [1]. https://www.fastcompany.com/91065690/cocoa-beans-production-supply-shortage-why https://www.fastcompany.com/91065690/cocoa-beans-production-...

4gotunameagain 3y ago
> drier weather due in part to climate change Climate change is definitely a thing, but you cannot know whether this dry streak is due to climate change.
- jauntywundrkind 3y ago
  We don't have to flog this dead horse every time. Ok, fine. Maybe there's a 0.000001% chance this has nothing to do with climate change (caused by man made global warming at that) & is just a temporary aberration. It's only 99.99999% certain. Is that vanishingly impossible probability worth hopping in to defend? Is it? Do we have to suffer this, every time someone mentions climate change? Why be a denialist? What makes it worth considering this anti-stance for even a second? Why bank so much on the shadow of a doubt?
  - nathanaldensr 3y ago
    "Every news story that even remotely involves the weather is climate change." Well, except for 0.000001% of them.
  - pasttense01 3y ago
    Climate change shows its effects over decades--not over a year or two as has happened with cocoa.
    - defrost 3y ago

Zren 3y ago

LastWeekTonight w/ John Oliver did a segment on Chocolate 4 months ago btw. Cocoa production is definitely underpaid so it wouldn't be terrible for this higher price to stick. It's not like the chocolate companies will drop their prices after they mark them up for months. https://www.youtube.com/watch?v=FwHMDjc7qJ8 https://www.youtube.com/watch?v=FwHMDjc7qJ8

TacticalCoder 3y ago

I want to fix this injustice. How can I short cocoa?