Commodities Watch: Cocoa is Good, Gold & Silver Challenge (ADM, BHP, POT, SLV, GLD)

It’s time for our daily look at commodity prices and news. Researchers at Harvard University analyzed data from a number of studies and concluded that cocoa consumption may reduce blood pressure, improve the health of blood vessels and cholesterol levels, among other things. The greatest benefit comes from dark chocolate with low sugar content and cocoa content of at least 70%.

Better stock up on dark chocolate bars now, though, because cocoa prices are rising because of a ban on shipments from Ivory Coast, the world’s largest producer of cocoa. The price paid to cocoa farmers has fallen dramatically in this west African country, but the prices paid on the international market have skyrocketed. At the end of February, the New York price was more than $3,620 per metric ton. That has fallen a little, to around $3,250 today, but could spike again as traders have been told that Ivory Coast’s former president has demanded that they pay export taxes by March 31 or he will confiscate the 400,000 metric tons now in Ivory Coast warehouses. In the US, Archer Daniels Midland (NYSE: ADM) and privately held Cargill both process cocoa into a variety of products.

Australia-based miner BHP Billiton Ltd. (NYSE: BHP) and its partners will invest $13 billion in growing their output of iron ore and coal. BHP figures its share of the investment will total about $9 billion. The funds will be spent to expand mines, improve rail links, and expand port facilities. Ever since the company’s failed $39 billion bid for Potash Corp. of Saskatchewan (NYSE: POT) it’s been looking for ways to put its cash hoard to work. BHP will buy back $10 billion in stock this year and is planning to spend billions more by 2015 on its mining and oil operations.

The Financial Times has reported that Iran has been one of the world’s largest gold buyers over the last decade.  The country is believed to hold more than 300 metric tons of gold, nearly double the amount it held in 1996. The purchases are likely to have been made to reduce Iran’s dollar holdings and to protect the country’s assets from being seized in the event of a confrontation with the West.

Gold and silver are both retreating around mid-day today as equities moved back into favor following a report from the US Department of Commerce that US GDP grew at an annual rate of 3.1% in the fourth quarter of 2010, a higher-than-expected finish.  The iShares Silver Trust (NYSE: SLV) hit a new all-time high of $37.26 and the SPDR Gold Trust (NYSE: GLD) hit a new all-time high of $141.28 just on Thursday.

Strong wheat prices are expected to increase global wheat planting in 2011. The UN Food & Agricultural Organization expects global wheat production to rise 3.4% above 2010 production, to 676 million tons. What the UN calls “low-income food-deficit countries” produced 5.6% more wheat in 2010 and will import less in 2011 as a result. The bad news is that the higher wheat prices will increase their import bill by 20%.

Paul Ausick