European Commodities: What Smart Money Says About Bunds Now

European Commodity Winners Last Week

Cocoa #7 (CAH25), +11.54%

Global cocoa production has declined, with estimates suggesting an 11% year-over-year decrease for the 2023/2024 season. Key producers like Côte d'Ivoire and Ghana, which account for over 60% of global output, have been hit hard by extreme weather, aging trees, and diseases like the swollen shoot virus. These supply issues, coupled with speculative trading, and an inelastic demand 
have pushed cocoa prices to record highs.

The last four weeks show strong bullish candles well above the 10 (6,157), 20 (7,102) and 50 (7,642) EMAs. The key resistance from here is 10,000 which is still a long way off. Cocoa made a historical top at 11,722 back in April, and since July it has been locked in a wide range between 5,800 and around 7,000. 

The RSI reads 68.17, approaching the oversold area. Long traders should carefully watch now if prices break past 9,000 as this is a key resistance.

Robusta Coffee 10-T (RMF25), +9.71%

The Robusta coffee market is currently experiencing significant challenges due to tight global supplies and high demand. 

Vietnam and Brazil have faced extreme weather conditions, including droughts and high temperatures, which have reduced crop yields. Vietnam, the world's largest Robusta producer, has reported concerns about its 2024/2025 crop due to depleted irrigation sources.

Geopolitical tensions, such as the Red Sea conflict, have disrupted shipments from Vietnam, affecting the availability of Robusta beans in Europe and other markets. Arabica prices remain high, so roasters are increasingly blending Robusta into their products to reduce costs, driving up demand for Robusta.

The weekly chart is very bullish, but it will face strong resistance at 5,500. 

Prices are above the 10 (4,724), 20 (4,515) and 50 (4,724) EMAs. This week made a high at 5,327 creating a strong pullback thereafter (inverted hammer).

This could be an early sign that a break or even reversal is coming. We need to wait until the end of the week once the full candle is formed to confirm it.

Euro Buxl (GXZ24), +2.87%

The Buxl future is based on German government bonds (Bunds) with maturities of approximately 30 years and it tracks long-duration bonds, offering high sensitivity to interest rate changes.

The contract moves opposite the  direction of long-term European interest rates.

Buxl made a 10 year low at 118.30 on October 2023 with a spectacular crash from the 233 top reached on February 2020. The recent jump above the 10, 20, and 50 EMAs on a daily chart indicates
a starting recovery, as the market believes now that the worst is over with long-term high interest rates in the euro area.

As bond markets mostly reflect the "smart money" (institutional)  allocation, a low interest rate  environment forecast  for the next months will be bullish for European commodities.

European Commodity Losers Last Week

Rapeseed (XRG25), -6.45%

Excessive rainfall and flooding in key European regions, such as Germany and Poland, have damaged crops, reducing the planted area and projected yields. The 2024 European rapeseed crop is estimated to decline by approximately 1.5 million metric tonnes compared to the previous year, potentially becoming the smallest crop since 2021/22.

Despite challenges in Europe, some regions, like Canada, have seen stable production, balancing the global market.

Demand from the biofuel sector, a major consumer of rapeseed oil, has weakened due to competition with other oils like soybean and sunflower oil, which are currently cheaper.

In Europe, rapeseed oil prices have recently declined due to weaker demand and high competition but are expected to stabilize or rise with tighter supply in the coming months​.

Rapeseed charts suffered an important pullback last week, topping at the 540 area. The 10 EMA (514.25) serves as a dynamic support and is currently under test.

The weekly RSI indicator has been statistically very reliable and this instance was no different. For now the trend is up, but watch out for any development below the 10 EMA, as this will put an end to the current bullish direction.

White Sugar #5 (SWH25), -4.06%

The International Sugar Organization (ISO) recently reduced its forecast for the 2024/25 deficit to 2.51 million metric tons (MMT) due to improved output estimates in key regions. For 2023/24, the ISO expects a surplus of 1.31 MMT, revising earlier projections. Increased sugar production from regions like India and Thailand has balanced concerns about reduced yields in Brazil and the European Union.

On the demand side, it is projected to remain steady but not grow significantly, with per capita consumption showing limited increases. This reflects broader health-conscious trends and substitution by alternative sweeteners.

Prices are well below the 10 (557.65), 20 (562) and 50 (561.45) EMAs in a clear downtrend started on Sept. 27. So this has been and for now remains a market for short traders with entries at the 10 EMA acting as dynamic support.

Having said that, the area close to 540 has acted as strong support recently, so short traders should take it as a warning.   

On the date of publication, Cesar Marconetti did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.