On May 30, 2008, at 10:17 PM, Michael Perelman wrote:
The Journal article does not discuss oil, but chocolate. Even so,
the article is of
interest because it dismisses the idea that fundamentals are
responsible for a rapid
increase in prices...
..."Cocoa investors acknowledge that they can affect prices but say
their influence is
strictly short term. Any increase in prices should lead to farmers
growing more
cacao trees, which produce cocoa beans, driving prices down again,
they say."
"One of the puzzles behind the cocoa-price increase is that it
doesn.t appear to
reflect an imbalance between supply and demand. In the year ending
in September,
there will be almost enough cocoa grown to meet the world.s needs,
according to the
International Cocoa Organization, a trade group. The expected 51,000-
metric-ton
shortfall isn.t particularly large and can easily be covered by
existing stock, the
group says .... The fundamentals do not justify this price, and I
haven.t heard of
any other explanation other than [investment] funds,. says Hagen
Streichert, a German
government official and the spokesman for cocoa-buying countries on
the
International Cocoa Council."
If speculators, not "fundamentals," are driving up prices then these
speculators must be hoarding
actual cacao beans. Not just gambling against an equal weight of
other (these being bearish) speculators.
If so, these hoards of a very perishable (fat becomes rancid)
commodities will have to be disgorged in a
much shorter amount of time than it would take to grow new cacao
bushes. The short term influence of speculation, minus physical
hoarding, must be very short term indeed. Unless *demand side*
fundamentals
justify the higher price.
Shane Mage
"Thunderbolt steers all things...it consents and does not consent to
be called Zeus."
Herakleitos of Ephesos
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