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800-634-3194(March 15, 2000) COCOA: New highs, mostly on the back of fund buying. Now that the Ivory Coast harvest is behind us, the level of beans coming to port is beginning to drop. This implies that the supply, seen as burdensome for so long, may now begin to be viewed in a new light. While much of this rally has been generated by funds and other spec players, the fact that hedge selling has slowed is also a good sign. The European Union voted to allow 5% vegetable fat as opposed to cocoa butter in making chocolate, ending a long disagreement. As a cautionary note, trading volume is said to be light, with most trading said to be technically-oriented. I am of the opinion that cocoa has seen its lows and is a buy on dips.
M. Steven Morgan
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