Bloomberg notes that the pound, which is used to trade cocoa in Africa and in London, rose on Friday by as much as 2.4% against the US dollar after a three-day slump of 4.2%. Cocoa, which gained 31% in 2008 and has risen by 6.3% YTD, had fallen earlier this week based mainly on speculation that supply from Ghana, the biggest grower after Ivory Coast (the two combine for nearly 60% of world production), would expand because of recent rainfall in some of the country’s main producing regions that would boost the harvest (which started in September and runs until June). On Friday, however, cocoa futures for May delivery climbed $23, or 0.9%, to $2,672 a metric ton on ICE Futures U.S. in New York.
Yet Michael Ragazzo, president of MBL Commodities Ltd. in New York, indicated that he is still “bullish” on cocoa because of the forecast for a third straight year of production deficits. In late December, officials in the Ivory Coast, for instance, estimated that the upcoming 2008-2009 cocoa harvest would be 1 million tons, which is down from 1.3 million tons a year ago. Perhaps another reason to be keen on the bean, however, is that over the past 6 months, the British pound has fallen more than 20% against the Euro and close to 30% against the dollar. To that extent, the pound looks oversold. Or is it? Kathy Lien wonders whether the quantitative easing that the Bank of England is expected to undertake will drive EUR/GBP back towards parity.