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The Rising Price for Your Hot Chocolate

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    Countdown to the Closing Bell panel on rising commodity prices from livestock to cocoa.

  • Duration 7:16
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-- we have seen record soft commodity prices driven by this summer's massive US -- but there's also bitter news.

For chocolate lover's heat and a lack of rain in the Ivory Coast has been pushing up the price of cocoa beans up 13%.

Since January but commodities across the board soaring -- shaken up but that team and take a look at all the soft commodities that are out there we -- Jeff Flock standing by.

Shawn Hackett we have got also have games create what -- Jeff Flock.

You know what's happening you're looking at capitol today but obviously a big piece of that is the greatest story and the effect on the -- Yeah.

That's exactly what has driven this cattle market -- his trip that's it.

The cattle what you see behind me being auctioned into market video it's so expensive to feelings don't particularly to finish them when your invention when -- -- -- dollar and more rational world right now yeah that has forced forced a lot of these -- markets one -- -- positive disaster -- your -- was we have had -- yeah.

Rain in the midwest.

So let's bring up the pastures and -- your -- in the pasture.

And it applies much warned that that's gonna go back around to -- because of the US cattle -- is at its lowest level that is being.

Decades -- earlier this auctioneer behind me this kind of -- did you do if you have a genuine cattle auction I heard about ten.

And perhaps we'll invest didn't read it because it's only going up as we go forward.

Back then and prices are lower now -- we're gonna she'd hire guys to get -- -- auction -- my grand -- -- little -- right now let me go over now the Shawn -- and talk about the other story that I mentioned at the top of this and that obviously is a situation with cocoa.

And the Ivory Coast -- political list is there's also.

Issues with the weather what are you watching.

Well I mean -- -- is notorious for having a problem on the Ivory Coast and Ghana which represents 65% of production.

We've seen a very very dry -- past thirty days.

The critical time for Ivory Coast production potential as the next thirty days so if they forecasters are correct.

El Nino is going to continue to strengthen the stripe pattern is expected to continue and then we can -- be looking at some significant.

Meaningful irreversible.

Production declines in this main region.

If that -- pans out than the cocoa market to really really take off from the classic.

Kind of a supply shock market.

On top division -- you know we have this.

Unrest going on and the Ivory Coast a little bit.

-- president's mills died suddenly there's elections at the end of the -- -- also political issues in Ivory Coast and Ghana.

Have historically created big upswing is in the cocoa market so we could be looking at a double bullish condition of bad weather report crops.

And instability in the region against strong Asian demand -- -- really really create a -- even horrible crisis so I really think.

The bull market in cocoa is just getting started.

Bull market for traders Sean let that we officer point out the fact that many food companies all the food companies the processed cocoa whether it's -- -- -- mean you can just you name it hostess.

They're the ones -- -- paying and then it's gonna end up on the consumer -- correct.

That's correct -- me what happens in the beginning is that the candy manufacturers get their margin squeeze and then they start passing on higher prices to consumers -- And then -- consumers start to balk at paying these higher prices than they lower the package size.

So for example you would instead -- getting accounts bar for certain price they give you'll.

An eight -- -- for the same price so it looks like you're paying the same price which are getting less product value and I would expect to see.

All of those things start to play out of this cocoa market really gets going like -- a couple years back.

Remember -- that was happening with cereal boxes and -- that.

-- news -- over the Rhode Island alright Ed James clarity options sellers.

Dotcom led James you're talking obviously about the situation of cocoa but there's also show that there's also copied those contracts -- we are watching right now.

Yes they are coffee and sugar certainly have not participated.

In the great -- bull market of 2012.

Basically there's two reasons some of the biggest the biggest consumer of course -- coffee and for chocolate is the European Union.

And certainly we know what's going on there right now so demand right now is down.

What we're also looking at right now is Brazil.

The largest producer of these commodities and they were doing extremely well 213 years ago.

And there were holding a commodities off of the market.

Causing commercial interest to push the market higher now it's -- it's almost payback time.

Right now Brazilian economy is a slackening right now and they are selling commodities for cash.

And a commercial interest in sugar and -- you're sitting on their hands and driving the prices lower.

We often talk about commodities overshoot on the upside in overshoot on the -- -- how they do that is basically if prices are falling right now -- coffee and no sugar producers are selling.

Commercials right now are notorious for allowing inventories to -- during lower price times and right now we're going under fair value in those -- markets.

-- lets us finish up the soft commodities block and talked to Chris durst from -- is capital Chris.

You're watching another area that is -- we're talking about that with Jeff Flock but also the effect in the capital markets all the controversy with -- right.

Now.

If there is a little bit of a controversy in and what you see is a little bit of a range -- scenario with -- A lot of people thought if they're gonna take -- -- gasoline if talks out of Washington.

Yesterday and today -- hinted that they might -- ethanol.

At least to a lower percentage and the mixture.

-- -- -- -- dip below the 780 level and we we didn't see that so everyone's really seeing really bullish.

-- the reports continue to come out that this drought situation is really cause.

The corn yields to be a lot.

That historic lows I've heard and in the -- right now.

Individuals are not willing to get short -- until we get at that 780 level.

So everyone's bullish on corn soybeans and we are sort of range bound and now we got a little relief here in the midwest that the crowds.

You know sort of hearted.

And we actually got some rain.

Hopefully get their water showing here in Chicago but corn do not -- sure anytime soon.

-- -- let's talk muddy I forgot to mention don't want it about Shawn Hackett really quick.

That is Rais.

-- that is another contract that had an effect on many Third World countries.

Right I mean what appealed -- realizes when the grain markets get going it brings the wheat market along.

And half the world lives off of wheat and rice so one -- it's -- very expensive compared to rise.

Then the the other parts of the world that rely on these two key commodities switch their demand away from expensive week.

And over to the cheaper former rice right now -- wheat prices are.

-- at a near historical high in relation to rice so my expectation is that even though the rice prices have remained subdued.

-- -- Is gonna start to really escalate rice prices going forward as the next big grain market to really take off would be the rice market which is pretty typical tends to be.

A follower market wants a a drought or gray market bull market gets going so I would.

Feel that's where the remaining opportunity to play the drought -- is in the rice market you.

Well is instant story with many angles obviously -- is commodities affect a lot of things to comment thanks to all of you appreciate it great.

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