Chocolate High: Cocoa ETNs Surge

June 19th at 1:45pm by Tom Lydon

The growing middle class in the emerging markets is gobbling up chocolate confections, pushing cocoa prices and related exchange traded notes to near three-year highs.

The iPath DJ-UBS Cocoa TR Sub-Index ETN (NYSEArca: NIB) is up 14.1% year-to-date while the iPath Pure Beta Cocoa ETN (NYSEArca: CHOC) increaed 13.4% so far this year. Both ETNs are trading near their highest level since September 2011.

ICE cocoa futures were relatively flat Thursday, trading around $3,111 per metric ton.

Adding to the rising demand for cocoa beans, a batch of new processing facilities have been raised to cater toward the rising chocolate consumption in emerging countries like India and China, reports Emiko Terazono for Financial Times.

Over the past five years, Asia’s cocoa demand has jumped 29%, compared to a 1% decline in Europe.

“This is a technical situation. There’s no shortage of cocoa in Europe,” Jonathan Parkman, joint head of agriculture at broker Marex Spectron, said in a Reuters article. “We had undeniable demand for beans from Asian factories, the response to that was that the structure became backwardated in London.” [Favorable Weather Lifts Ag ETFs]

Meanwhile, chocolate industry observers are growing concerned about the supply side. The global confectionery industry utilizes beans from aging trees and small farms in west Africa, which account for 90% of global cocoa supply. The small farmers do not have enough money to expand operations and are watching the younger generation leave the farms.

Nevertheless, short-term supply from Ghana and the Ivory Coast, the largest producers of cocoa, have been higher-than-expected this year.

“The Ivory Coast has seen abundant rainfall in recent weeks, increasing expectations of a strong mid-crop, the smaller of the two crops harvested annually,” Corrina Savage, commodities analyst at research firm Mintec, said in the FT article.

iPath DJ-UBS Cocoa TR Sub-Index ETN

NIB_ETN

For more information on cocoa, visit our cocoa category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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