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Cocoa Supply Shortage Likely To Persist

Cocoa is not typically a closely watched commodity, but for those who have been watching significant profits may have already been collected with more to come as the delicious product is now reaching record levels, with little relief in sight.

The issue is a supply concern as cocoa farmers in West Africa have been hit by a trifecta of bad weather, diseases, and failing trees. The combination is creating one of the worst supply deficits for cocoa in decades, with prices more than tripling over the past 12 months and up 129% since the start of 2024.

Tuesday’s price action saw cocoa futures for May delivery surging to an all-time intraday high of $10,080 per metric ton before ending the day down 0.3% to settle at $9,622.

The world is currently seeing the largest cocoa deficit in 60 years, with expectations of a shortfall of 374,000 tons, and, while chocolate producers like Hershey’s and Nestle have been able to hedge their positions and keep consumer prices in check, it’s expected that chocolate prices for consumers will see increases by the end of this year.

Because there’s no easy fix to the problem cocoa prices are expected to remain elevated for the remainder of 2024 at the least. The Ivory Coast and Ghana produce some 60% of the global supply of cocoa, but both countries are seeing poor weather conditions and several cocoa-related diseases. Compounding the issue is the fact that many of the remaining healthy trees are beyond their peak yield potential. Neither country has had a major round of new planting since the early 2000’s.

Analysts believe much of the current run-up in prices is due to speculation from producers trying to lock in prices.

Asian Daily Market Review

Asian markets were mixed in cautious trade on Tuesday as investors across the region reacted to the overnight losses on Wall Street while also preparing for an upcoming reading on U.S. inflation that could give some clues to upcoming moves from the Federal Reserve. Also in focus was the weakness in the Yen, which remains at levels not seen since 1990.

Japan’s Nikkei was flat on the day, ending with a slight loss of less than 0.1%. Market participants are speculating on whether the Bank of Japan will move to prop up the Yen, which remains unaccountably weak despite the Bank of Japan raising interest rates into negative territory for the first time in 17 years. Shares of Softbank Group fell by 1.2%, while Sony shares finished 0.5% higher. Among the major exporters Toyota and Canon each added 0.5%, while Panasonic shares declined by 0.9%.

In Australia the S&P/ASX 200 fell by 0.4%, with the big four banks contributing to the broader market weakness. Shares of ANZ and NAB were 0.3% lower each, Commonwealth Bank dropped by 0.2%, and Westpac underperformed with a loss of 0.8%. The major miners had a similar performance as BHP shares slipped 0.6% lower and Rio Tinto edged lower by 0.2%.

Mainland Chinese markets managed some small gains as the benchmark Shanghai Composite advanced by 0.2% and the smaller cap Shenzhen Composite ended 0.3% higher. Over in Hong Kong the Hang Seng outpaced the mainland, posting a gain of 0.9% for the session.

In South Korea the Kospi finished 0.7% higher, while Taiwan’s Taiex closed out the day with a 0.3% loss.

Southeast Asian markets were mixed as Singapore’s Straits Times Index led gains for the region with a 1.1% advance, while Malaysia’s KLCI edged lower by 0.1%.

European Daily Market Review

European markets tumbled today as investors continue to ponder last week’s central bank policy reports from Europe and the U.S.

The benchmark Stoxx 600 fell 0.05% at 9:40 a.m. London time as Monday’s lackluster performance continued.

Travel stocks soared 0.75% while mining stocks lost 0.6%.

The German DAX gained 44.80 or 0.25% from 18,306.

The French CAC-40 inclined 1.33 or 0.02% from 8152. FTSE-100 slipped 8.63 or 0.11% from 7,908.

Grocery delivery service Ocado advanced 2.7% after declaring a10.6% year-on-year revenue rally.

German consumers came slightly above in March, though the recovery in sentiment is still into a slow motion.

Hungary is very likely to move to a lower gears the rate of its rate reductions. This is the case amid downfalls of the forint limits.

The National Bank of Hungary is very likely to drops its benchmark interest rate by 75 basis points to 8.25%.

U.S. Daily Market Review

The Dow Jones Industrial Average are in red at the start of the new trading week.

The Dow Jones Industrial Average lost 118 points, or 0.3%. The S&P-500 fell 0.1%, while the Nasdaq Composite was little changed.

Crude oil futures advanced as Ukrainian drone strikes negatively impacted the Russian production abilities and the Kremlin orders output reductions to meet OPEC+ targets.

Shares of Intel led the market lower, with the semiconductor firm sliding 1% after The Financial Times reported that new China guidelines would cease Intel chips in government servers and computers.

United Airlines stock tumbled 4% after the Federal Aviation Administration announced that will require greater security measures after a series of safety incidents.

President Joe Biden’s re-election campaign will include massive fundraising event Thursday having leading figures from the entertainment industry, along with former presidents Bill Clinton and Barack Obama.

Disney Hits New 52 Week High On Analyst Upgrade

Shares of entertainment giant Disney gained 2.8% on Monday following an upgrade from Barclay’s based on the belief that the company’s turnaround plan is taking shape.

Barclay’s analyst Kannan Venkateshwar upgraded Disney to Overweight from Equal Weight while also increasing his price target on the stock substantially to $135 from $95. With shares currently trading around the $120 level, that implies a roughly 15% upside from current levels.

In his note Venkateshwar recommended the stock based on a number of factors that have increased investor confidence over the past several months. Those include better than expected earnings guidance and free cash flow from the company, the consolidation of Hulu and other cost cutting measures, along with some outside events such as the strike in Hollywood.

He also notes that Disney is already outpacing the markets this year, thanks to the propensity for media investors to be long Disney shares. Since the start of 2024 Disney shares have handily outpaced the S&P 500 and Dow Industrials, rising by 31.8% versus gains of 9.5% and 4.3% respectively for the indices.

With shares hitting a new 52-week high on Monday it’s been a significant turnaround for the stock, which was trading at multiyear lows during 2023.

Disney has been struggling with losses from its streaming services, a decline in traditional television viewership and the associated ads revenue, and slower growth at its theme parks.

However, Venkateshwar believes that the second half of 2024 could be more impactful for Disney’s financials as a number of the turnaround elements are still works in progress. He specifically mentioned the possibility of profitability for Disney’s streaming service, which he believes would be bullish for Disney’s stock price.

Asian Daily Market Review

Asian markets were largely higher on Wednesday following another record setting session overnight on Wall Street. Investors were also looking ahead to the U.S. Federal Reserve monetary policy decision just a day after Japan hiked its own interest rates and ended its negative interest rate policy. It’s expected for the Fed to keep interest rates unchanged at this meeting, but that didn’t stop the Yen from sinking to its lowest level against the U.S. dollar since 1990.

Japan’s markets remained closed for a public holiday, so we’ll have to wait to see investor reactions there as the Yen tests multi-decade lows versus the U.S. dollar.

In Australia the S&P/ASX 200 slipped 0.1% lower after the Bank of Australia left interest rates at a 12-year high, while also signaling that they are done with rate increases. The big four banks helped contribute to the broad market weakness, with ANZ losing 0.4%, NAB and Commonwealth Bank ending slightly lower by 0.1%, and Westpac declining by 0.3%. The major miners helped to offset losses from the banks, with BHP adding 0.5% and Rio Tinto gaining 0.8%.

Mainland Chinese markets ended with gains as the benchmark Shanghai Composite tacked on 0.6% and the smaller cap Shenzhen Composite advanced 0.2% higher. Over in Hong Kong the Hang Seng underperformed the mainland, but still managed a slight 0.1% increase for the day.

In South Korea the Kospi shot higher by 1.3% to lead gains for the region, and in Taiwan the Taiex sank by 0.4%.

Southeast Asian markets were a mixed bag, with Singapore’s Straits Times Index inching higher by 0.1%, while Malaysia’s KLCI suffered a 0.6% loss.