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Nestle Shares Reflect Global Demand For Cocoa

Mar. 07, 2018 6:15 AM ETNestlé S.A. (NSRGY)NIB, CHOC11 Comments


  • A bullish trend in NSRGY and cocoa for two decades.
  • Cocoa breaks out to the upside.
  • NSRGY falls with stocks.
  • Cost of goods sold could impact short-term earnings.
  • The prospects for both looking sweet in the long term.

Nestlé S.A. (OTCPK:NSRGY), a Swiss food, and beverage company operates around the world. The company offers a wide range of products, but its name is often synonymous with chocolate. I remember an old advertisement for their products that was a jingle that went something like this: "N-E-S-T-L-E-S, Nestles spells the very best, chocolate."

The company has been around since way back in 1866, and with headquarters in Vevey, Switzerland, they are one of the world's leading consumers of cocoa beans. Nestlé is also a significant buyer of many other agricultural commodities required to produce their food products.

Since the turn of the century, both the price of NSRGY and cocoa have moved to the upside. Population and wealth around the world have grown, which increases the demand for food. Each quarter there are approximately twenty million more people on the earth competing for finite agricultural crops, and that has increased increase the demand for both chocolate and the products that Nestlé offers the world.

A bullish trend in NSRGY and cocoa for two decades

These days, the price of cocoa beans and Nestle stock are both significantly higher than they were back in 2000.

Source: CQG

As the monthly chart of ICE cocoa futures highlights, in February 2000, the price of cocoa beans was trading at the $750 per ton level.

Source: Barchart

At the same time, NSRGY shares were at the $17.20 per share level. On Tuesday, March 6, nearby ICE cocoa futures were trading at $2441 per ton, over three times the price in early 2000, while NSRY shares were at the $79.65 level, over four and one-half times higher than the price at the turn of the century. Demographics has boosted the demand for the primary ingredient in chocolate, and for Nestlé's products.

Cocoa breaks out to

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This article was written by

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Weekly commodities commentary and calls, from a Wall Street veteran
Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is the #2 ranked author on Seeking Alpha in both the commodities and precious metals categories. He is also the author of the weekly Hecht Commodity Report on Marketplace - the most comprehensive, deep-dive commodities report available on Seeking Alpha.

Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.

Over the past two decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities.

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Andy’s writing and analysis are on many market-based websites including CQG. Andy lectures at colleges and Universities. He also contributes to Traders Magazine. He consults for companies involved in producing and consuming commodities. Andy’s first book How to Make Money with Commodities, published by McGraw-Hill was released in 2013 and has received excellent reviews. Andy held a Series 3 and Series 30 license from the National Futures Association and a collaborator and strategist with hedge funds. Andy is the commodity expert for the website about.com and blogs on his own site dynamiccommodities.com. He is a frequent contributor on Stock News- https://stocknews.com/authors/?author=andrew-hecht

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