Early December trading brought a drop in March cocoa prices. Since then, the market has consolidated due to the lack of supply or demand news support. Traders have taken short-term positions during the last month of the calendar year as we await more long-term outlook news from key producing regions.
As we head into 2018, stronger demand appears to be headed into the cocoa market. Specifically, European demand is set to increase. The euro and pound are also providing support in this region. West African production levels should be down in 2018. Weather premium will be added to the market. Damaged cocoa trees due to age and La Nina will also help boost prices due to lower output.
Before the market can go up, look for some liquidating going into the holidays as traders head to the sidelines. As far as 2018, prices should head back up to the 2300-2400 range if cocoa beans are potentially damaged as anticipated.
Cocoa Mar ’18 Daily Chart