Fundamental and Technical Analysis of Cocoa Daniel P McNamara

NY Monthly Cocoa – 1980 to Present

‘80 ‘84 ‘88 ‘92 ‘96 ‘00 ‘04 ‘08 ‘12

2000 low

5368

From 2000 Low, Cocoa Prices Recover…

‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘00

Dec 2000 – Jul 2008

NY Cocoa, Monthly 2000-2014

Fin Mkt Collapse

US Dollar declines.

‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘00

Dec 2000 – Jul 2008

Dollar Index, Monthly 2000-2014

Fin Mkt Collapse

All Commodity Prices Rise With Global Demand and Weak Dollar

Source: Reuters

‘01 ‘02 ‘00 ‘04 ‘05 ‘03 ‘07 ‘08 ‘06 ‘10 ‘11 ‘09 ‘13 ‘14 ‘12

Dec 2000 – Jul 2008

Financial Mkt Collapse

Cocoa Specific Market Forces

Surplus/Deficit in thousands of tons

2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014

Cocoa Calendar Year – Oct-Sep

+19

-139 -279 -75

Financial Mkt Collapse

Deficit

Surplus

Cocoa Specific Market Forces

Pres. Gbagbo captured - April, 2011

Cocoa Calendar Year - Oct to Sep

2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014

-279 -193 -139 -75

+87 +328 +19

Cocoa Low

Fin Mkt Collapse

What Are The Forces That

Will Drive Prices Now?

Global Middle Class

1.8 Billion

3.2 Billion

4.8 Billion

Projected Growth of Global Middle Class

2009 2020 2030

Source: Kharas, Homi (2010), “The Emerging Middle Class in Developing Countries”. Developing Center Working Papers, OECD Publishing.

Global Middle Class Spending

$21,278 $35,045 $55,680

Projected Spending (in billions of 2005 PPP dollars)

2009 2020 2030

Source: Kharas, Homi (2010), “The Emerging Middle Class in Developing Countries”. Developing Center Working Papers, OECD Publishing.

Largest Growth - Asia Pacific Region The Global Middle Class is defined as households with daily expenditures between $10 - $100 US dollars per person.

Projected % of Middle Class per Region

North America

18

Europe 36

Asia Pacific

28

Ctrl & S. America

10

Sub-Saharan

Africa 2

Mid East & N. Africa

6

2009

North America

10

Europe 22

Asia Pacific

54

Ctrl & S. America

8 Sub-

Saharan Africa

2

Mid East & N.

Africa 5

2020

Source: Kharas, Homi (2010), “The Emerging Middle Class in Developing Countries”. Developing Center Working Papers, OECD Publishing.

2030 -Asia Pacific is 66% of Total GMC Asia Pacific Region has 66% of the Global Middle Class by 2030, while Europe and the US have declined to a combined 21%.

Projected % of Middle Class per Region

North America

18

Europe 36

Asia Pacific

28

Ctrl & S. America

10

Sub-Saharan

Africa 2

Mid East & N. Africa

6

2009

North America

7

Europe 14

Asia Pacific

66

Ctrl & S. America

6 Sub-

Saharan Africa

2

Mid East & N.

Africa 5

2030

Source: Kharas, Homi (2010), “The Emerging Middle Class in Developing Countries”. Developing Center Working Papers, OECD Publishing.

The Chocolate Industry Responds

Kraft Buys Cadbury, Dec 2010

Kraft Buys Cadbury, Dec 2010

Barry Callebaut to acquire the Cocoa Division from Petra Foods, Singapore, Dec 2012

Barry Callebaut to acquire the Cocoa Division from Petra Foods, Singapore, Dec 2012

Barry Callebaut and P.T. Comextra Majora $33 million cocoa facility in Makassar/Indonesia, Sept

2013

Barry Callebaut and P.T. Comextra Majora $33 million cocoa facility in Makassar/Indonesia, Sept

2013

Hershey Plans $250 Million Plant in Malaysia, Oct 2013

Hershey Plans $250 Million Plant in Malaysia, Oct 2013

Hershey to Buy Shanghai Golden Monkey- China Candy Maker, Dec 2013

Hershey to Buy Shanghai Golden Monkey- China Candy Maker, Dec 2013

Cargill commissions new cocoa processing plant in Gresik, East Java, May 2014

Cargill commissions new cocoa processing plant in Gresik, East Java, May 2014

Olam International Invests $61 Million In New Cocoa Processing Facility In Indonesia, May 2014

Olam International Invests $61 Million In New Cocoa Processing Facility In Indonesia, May 2014

M&M World Grand Opening in Shanghai, Aug 2014

M&M World Grand Opening in Shanghai, Aug 2014

The Challenges of Production

“Unlike large, industrialized crops, 80% to 90% of cocoa comes from small, family-run farms, with approximately five to six million cocoa farmers worldwide. In Africa and Asia, the typical farm covers two to four hectares (five to ten acres). Each hectare produces 300 to 400 kilograms of cocoa beans in Africa and about 500 kilograms in Asia.” Source: World Cocoa Foundation

Sustainability

Global effort to increase cocoa yields with programs such as Cocoa Vision, Cocoa Plan, Farmer First, Cocoa Action, Learn to Grow, and others.

A Traders Viewpoint…

March 2013 Daily

2011 Low

New ICE Tender Guidelines

2006-2014 Monthly Cocoa

July 2011 – March 2013

2011 2012 2013

Weekly Commitment of Traders

Sentiment

Dominican Republic Low! 100MA

200MA

Sept 2013 - Daily

Feb Mar Apr May Jun Jul Aug Sep Jan ‘13

Sept 2013 Daily – Technical Analysis

Aug Sep Oct Nov Dec Jan ‘13

Feb Mar Apr May Jun Jul Aug Sep

a

b

c

December 2013 Daily – Simple Trend

200MA

100MA

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Feb

December 2013 – Daily with Pitchfork

Low

High

Low

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Feb

December 2013 – Daily with Pitchfork & Trend Channel

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Feb

Low

High

Low

December 2013– Daily with Open Interest

226,009

171,213

Mar Apr May Jun Jul Aug Sep Oct Nov Feb

December 2013– Daily

200MA

100MA

Mar Apr May Jun Jul Aug Sep Oct Nov Feb

March 2014 – Daily with RSI Overlay

Jun Jul Aug Sep Oct Nov Dec Jan ‘14 Feb Mar

2609

40

34

2646

March 2014 – Daily RSI with Close Price

2166

2261

2256

2372

2291

2501

2528

2425

2574

2643

2641

2583

2742

2765

2661

2750

2609

2800 2809

2820

2921

Jun Jul Aug Sep Oct Nov Dec Jan ‘14 Feb Mar

2646

2567

July 2014 – Trend Channel w/ MA

200MA 100MA

Oct Nov Dec Jan ‘14 Feb Mar Apr May Jun Jul

July 2014 – Trend Channel with RSI

200MA

100MA

Oct Nov Dec Jan ‘14 Feb Mar Apr May Jun Jul

2659

2862

Weekly Cocoa with RSI

2643 2694

2862

2012 2013 2014

2987

Target Calculation: 2862-2694 = 168 + 2987 = 3155

Momentum High Target

Weekly Cocoa - RSI with SMA 9 & EMA 45

2013 2014

Fibonacci – December 2008

.618 Retracement

.382

.50

.618

Fibonacci – December 2009

.618 Retracement

.382

.50

.618

Fibonacci

.618 Retracement

.382

.50

.618

Weekly Cocoa - Fibonacci

2012 2013 2014 2011

.382

.5

.618

Target 3092

Weekly Cocoa – Elliott Wave Analysis

2012 2013 2014 2011

1

2

1

2

i

ii

iii

iv

v 3

4

3

4

Weekly Cocoa – Elliott Wave Analysis

1

2

1

2

i

ii

iii

iv

v 3

4

3

4

403

Target: 3252

403