Macro
Andurand Predicts Cocoa Crunch, Copper Climb Amid Oil Stability
Andurand predicts cocoa shortage with prices at $12,000 a ton, copper demand surge due to electrification, and uncertain oil market dynamics ahead of US election.
Key Takeaway
- Pierre Andurand highlights a significant cocoa market deficit, predicting prices could surge due to structural supply shortages and inelastic demand.
- Andurand also sees potential in copper, forecasting a substantial price increase driven by the energy transition and an impending supply-demand imbalance.
- Despite geopolitical tensions and US election outcomes, Andurand views oil market impacts as marginal, focusing instead on structural changes in commodities like cocoa and copper.
Cocoa Market Dynamics
Pierre Andurand, known for his expertise in trading oil and other energy-related assets, ventured into the cocoa market earlier this year, capitalizing on the commodity's price surge to a record $12,000 a ton. Despite a subsequent price correction to around $7,800, Andurand anticipates further upside due to looming extreme deficits in cocoa supply. His foray into cocoa, driven by an analyst's recommendation, was based on a detailed analysis revealing a significant supply shortage, with production down 17% from the previous year. This shortage is attributed to a combination of factors including adverse weather conditions, climate change, diseases affecting cocoa trees, and high fertilizer prices exacerbated by geopolitical tensions.
Copper and Other Commodities
Andurand's interest extends beyond cocoa to other soft commodities like coffee and orange juice, and notably to copper, where he identifies a structural shortage driving price increases. His analysis of copper forecasts a supply-demand imbalance, with demand driven by the global push for electrification and renewable energy sources outpacing the stagnant supply growth. This imbalance is expected to result in significant price increases for copper, underscoring the broader implications of climate change and technological advancements on commodity markets.
Oil Market Outlook
The discussion also touched on the oil market, particularly in the context of the upcoming US presidential election and its potential impact on oil prices. Andurand reflects on the resilience of Russian and Iranian oil production despite geopolitical tensions and sanctions, and the uncertain trajectory of US shale oil production. He speculates on the possible outcomes of the election on oil supply dynamics, including the enforcement of sanctions and the strategic decisions of major oil-producing countries.
Street Views
Pierre Andurand, Andurand Capital Management (Bullish on cocoa):
"We have a massive supply shortage this year... We see production down 17% relative to last year... tracking the export from the main exporters, mainly Ivory Coast and Ghana, that represent together about 60% of [the] world's production. We see basically Ivory Coast exports down 30% year to date, I mean season to date and Ghana down 41%. So just those two countries together since the start of the season, which is the 1st of October, are down 800,000 tons."
Pierre Andurand, Andurand Capital Management (Bullish on copper):
"I think copper should go up a lot... due to the energy transition we're getting as obviously as we have to electrify the world... Now we are getting into a market where despite the fact that Chinese property market will be much weaker than last fifteen years in terms of growth... we see a market in which we are going to have overall one million tons of demand per year roughly increase per year. And supply growth basically by end next year will be zero negative."
