Tug-of-War Between Supply and Demand in Cocoa Futures

Cocoa supply side of the fundamental equation is bullish
Cocoa traders waiting for COT data being released Friday
Traders monitoring how Asian grinding data will fair moving forward
Cocoa Futures Update

Cocoa Futures Update

Cocoa Futures Influenced By Low Supply and Weather

March cocoa futures hit a multiyear high last week as the market attempted to touch 3000. The supply side of the fundamental equation is bullish. Weather premium is in prices due to patterns in West Africa. Harmattan winds tend to affect the crop this time of year, this mixed with the dry season coming to an end, could see production data down. These factors have provided support for the traders who are long.

The weakness and uncertainty in demand have not allowed prices to cross 3000. If demand were to increase, 3200 is attainable. Asian grinding data will be a good indicator moving forward. With the Coronavirus and that region of the world not functioning normally (with imports and exports mainly), how long the market will be negativity impacted by the virus is anyone’s guess.

 

Technical Outlook In Cocoa

Technically in the short-term, a close above 2915 is needed to reaffirm the move higher. If these current levels fail, a drop back down to 2850 isn’t too farfetched. 


Looking Ahead

The COT data being released Friday after the close will show us if we are in store for some more long liquidation. Asian grinding data will be a good indicator moving forward.

Price Chart of Cocoa Market


Source: Tradingview

 

If you are interested in discussing the soft commodities further contact pmooses@rjofutures.com . 

About the Author

Peter Mooses is a commodity broker at RJO Futures. He enjoys the analytical aspects of futures trading and appreciates the economic impact that commodities have across all markets.