Softs

What the cocoa market has been waiting for: Higher demand, lower production

Posted 09/13/2017 3:26PM CTPeter Mooses

European cocoa demand is on the rise. The British pound made a new one-year high. These two factors will help cocoa move higher and could lead to the market to trade back in the 2000-2100 range. There is growing concern that production levels in West Africa may be lower than anticipated all season. Wet weather may have damaged crops and have caused concerns that black pod disease may be on the rise. West Africa saw a damper summer and some analysts are anticipating a drop in production for the last quarter of the year by almost 20%. As we head into the final quarter of 2017 and move into holiday season, chocolate companies’ demand outlook could affect prices in the futures.

Technically, in the short-term, the close below the 9-day moving is a positive indicator. The close below the 60-day moving average is also a positive long-term signal. 1995 in the December contract will be resistance, above that 2015. The market continues to find support around 1950.

In the near-term, watch weather patterns in Ivory Coast, European demand, and Indonesia’s import patterns. 

 

Dec ’17 Cocoa Daily Chart

Dec '17 Cocoa Daily Chart

Peter Mooses

Follow Peter on Twitter @PMoosesRJO. Peter's interest in trading began during a college internship with Bunge North America on the floor of the Chicago Board of Trade, where he assisted commodities traders and performed market research and analysis. Upon earning a B.A. in economics from the University of Iowa, Peter served as an analyst, transaction manager and team lead in the Global Trust Divisions for LaSalle Bank and Bank of America, where he managed transaction activity in multi-million dollar client fixed income and asset-backed securities portfolios. After years in the banking industry, it became apparent that Peter's real passion lies in futures trading. He joined RJO Futures because he enjoys the analytical aspects of futures trading and appreciates the economic impact that commodities have across all markets. Peter believes in utilizing market analysis and trends to help clients achieve balance between risk and return, while always keeping their investment objectives top of mind.