Commodity Roundup: Cocoa prices extend gains after surpassing $9,000 on supply woes

Cocoa prices (CC1:COM) extended gains on Tuesday, after rising for the fourth straight session, surpassing $9,000 a tonne for the first time ever due to a supply crisis as chocolate producers struggle to procure the grains. Cocoa futures gained by 11.5% last week as the supply crisis grows. Prices (CC1:COM) were trading +2.44% at $9,884.00.

The main reason is poor harvests in West Africa, a result of drought and disease, and the surge in prices are prompting candy manufacturers to crank out new products with less of the pricey ingredient, and pass on the cost to consumers. The crunch is being felt most in Europe, the world’s biggest chocolate consuming region, Bloomberg reported.

Among energy commodities, oil prices were little changed on the day, after gaining in the previous session, as traders weighed the risk of recent attacks on Russian oil refineries by Ukraine, amid the ongoing Israel-Gaza conflict, which also threaten supplies in the Middle East region.

The Joint Ministerial Monitoring Committee of OPEC+ will be meeting next week, and the committee is unlikely to recommend any changes to the current production cuts agreement until the end of second quarter of this year.

Meanwhile, uncertainty over Venezuelan supply lingers as the current sanction relief comes to an end in April 2024, and the US is yet to decide on further relief, ING said. Media reports suggest that some buyers, including India, have already started cutting oil purchases from the country amid the uncertainty, it added.

U.S. natural gas (NG1:COM) futures rose 2%, extending gains to a second trading session against a weaker U.S. dollar.

Last week, Freeport LNG said it anticipates two of the three trains at its plant will remain out of service for testing and repairs through May, on top of maintenance since late January following a deep freeze in Texas that caused problems on one of the trains. After the maintenance work is completed, Freeport LNG said its production capacity will jump by 10% from 15M metric tons/year to ~16.5M tons/year by June.

European natural gas meanwhile fell, following an extended the upward rally, with prices rising to the intra-day highs of EUR29/MWh yesterday on concerns over tightening supplies. The European gas market remains well-supplied currently, with tanks at 59% full compared to a seasonal average of around 42%.

“This renewed focus on energy infrastructure suggests further disruptions are likely, even though Europe has emerged from winter with unusually higher levels of gas inventories. The gains were limited amid sluggish demand,” ANZ analysts said in a note.

Among metals, silver prices rose, along with platinum, and gold, supported by a weaker U.S. dollar (DXY). The Federal Reserve’s signal of potential rate cuts has increased the attractiveness of non-interest-bearing bullion, which surged to fresh all-time highs above $2,200 an ounce, adding around 10% to its value since mid-February.

Additionally, demand for gold from central banks, particularly from China, has been a powerful driver of the rally, offsetting selling pressure from gold-backed ETFs.

J.P. Morgan Commodities Research in a note said, while recent dovish messaging from Powell supports brokerage’s expectations for a rate cutting cycle beginning in June, which in turn drives the view for sustained higher gold prices later this year, macro backing to the current gold rally is still so far lacking and likely needs to come soon or risk a bit of a near-term unwind.

Potential stocks to watch: Perimeter Solutions SA (PRM) +16%, Galiano Gold (GAU) +15%, NioCorp Developments (NB) +13%, Taseko Mines (TGB) +8%, Compass Minerals International (CMP) -17%, Smith-Midland (SMID) -12%, American Battery Technology (ABAT) -9%, Atlas Lithium (ATLX) -7%.

Recent Commodity Price Movements and A look At Some ETFs