Cocoa Hits a Sweet Spot Among Crashing Commodities

© Provided by CNBC

Commodities have been crashing this year but there’s one in particular that’s hit the sweet spot.

Cocoa futures have gone up more than 14 percent year to date, representative of an uptrend that began in 2000.

“As more countries have become developed, there’s obviously demand for treats like chocolate,” said Alan Knuckman, chief market strategist at Bulls-Eye Options.

On CNBC’s “Power Lunch,” Knuckman also attributed cocoa’s success over the past five years to the strength of the dollar.

“Cocoa is priced in Europe in the cash market mainly, so that’s been supportive for the price because of the dollar strength and the European currency and the British pound weakness,” he said Wednesday.

Knuckman added that he doesn’t see the uptrend slowing down anytime soon, something that’s hurting margins for chocolate makers like Hershey  (HSY) in the U.S.

“From a risk-reward level, I think Hershey’s is really coming down in support,” he said. “I’d rather be a buyer of Hershey’s here than a seller because it’s already had a pretty healthy decline.”

Shares of Hershey were trading above $87 Wednesday afternoon.

Written by Ritika Shah of CNBC

(Source: CNBC)

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