3 ms·
Not even corporate, this has the "smell" of traders messing with the market. But these kinds of things always collapse eventually. Go to: https://tradingeconom
by 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 agoThe 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 agoThis 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?
- ars 3y agoI have a hard time believing that cocoa is so in-elastic that an 11% drop in supply translates to a 300% increase in price. Cocoa is a treat, with prices that high demand should plummet.
- gotoeleven 3y agoWho you gonna believe, the market-based consensus of 1000s of cocoa traders, or the lived experience of a wise ars?
- throw-the-towel 3y agoOTOH markets are known to stay irrational longer than you can stay solvent.
- fngjdflmdflg 3y agoThis isn't a stock market but a commodity market. Nobody is betting on what they think Cocoa will be worth in the future. So that point isn't relevant here.
- zer8k 3y agoIf you look at old crop/new crop spreads over other commodities such as corn and soybeans it's clear that the disconnect between the front and back month is entirely on the yield (and therefore the price) of the future harvest. In this case, the futures contracts going out to 2025 are pricing in a poor crop harvest (and therefore a higher future price). By construction the future will "collapse" to the cash price at expiration (modulo carry costs) meaning that the future is exactly representing the market consensus on future price. This is no different than a stock market where a stock's theoretical price is the consensus on discounted future cash flows of the company. If a stock had an expiration date then it would have to collapse to the "cash price" (e.g. the exact discounted cash flow) at expiration otherwise funny arbitrage things happen.