It was a lower week for cocoa futures as the fortunes in the weather market began to turn. Prices went lower as rains began to fall in West Africa.
The rains will start to restore tree health and help add to bean sizes in pods. There is not expected to be enough rain to materially affect the harvest progress. The midcrop harvest is expanding in West Africa and there have been reports of small bean sizes. However, the arrival of rain has made a lot of these reports go away. Southeast Asian conditions remain mostly favorable for cocoa development with a few showers reported in both Malaysia and Indonesia.
Demand for the holiday period is reported to be below expectations. Chocolate producers have been raising prices in response to higher cocoa and sugar costs, and the consumer has bought a little less. Overall, the market has stalled out and might have seen a short to medium term high struck in the last week or so. The recent rally has been based almost entirely on the lack of rain in West Africa, and the arrival of the rainy season takes away this important reason to buy. Traders will monitor arrivals and purchases to get a final idea of the crop size, but for now there should be enough cocoa to go around.
Overnight News: Scattered showers and storms are expected in West Africa. Temperatures will average near to above normal. Malaysia and Indonesia should see scattered showers in all areas. Temperatures should average near normal. Brazil will get mostly dry conditions and near to above normal temperatures. ICE certified stocks are lower today at 4.478 million bags.
Chart Trends: Trends in New York are mixed. Support is at 2930, 2900, and 2870 May, with resistance at 3020, 3050, and 3085 May. Trends in London are mixed. Support is at 2180, 2160, and 2150 May, with resistance at 2230, 2250, and 2275 May.