Lack of Demand During Pandemic Continues to Hurt Cocoa Trade

Cocoa futures could stay in the 2350-2500 range for the summer
Supply concerns continue to support
Bearish weather patterns
Cocoa Futures Update

Cocoa Futures Update

Economically, the world is in an overall slowdown. People aren’t spending money on nonessential items for the most part, weighing on chocolate sales. The demand of cocoa is down, if consumers aren’t spending money on chocolate due to Covid-19 restrictions, this will only pull cocoa prices lower than before the pandemic when demand was already a concern. Supply concerns continue to provide support though, mainly due to output concerns and bearish weather patterns.

The equity markets have rallied, but commodities haven’t followed, especially in the softs. With so many uncertainties remaining and lack of economic growth which is needed for people to feel comfortable to start spending money on luxuries and not just on necessities, cocoa futures could stay in the 2350-2500 range for the summer months. If another wave of coronavirus occurs globally, look for commodities like cocoa to take another hit lower – prices we saw in March will be tested.

WEB OE July Daily Chart


Source: Tradingview

If you are interested in discussing the soft commodities 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.