This week we saw the release of the ICCO’s quarterly supply/demand data. The ICCO announced that its global production expectations are down 2.3% and grindings are up 2%. Lower production estimates lead to higher cocoa prices and that is what we have seen of late. The West African dry season has added pressure to production and in turn we have seen a fairly strong bullish rally. Now that supply/demand news has taken center stage, we will look at outside forces to decide how long this rally can take place. Will a stronger dollar add resistance to this recent move higher? Can a recovery in the euro or pound help the demand side of the equation and give the market additional support? These questions will guide the trade as we enter the end of Q1.

Technically, the wheels are moving in the same direction as the fundamentals. Key levels have been broken, 2185, 2205. Support was found at 2215 and the May contract broke 2250 on Thursday. If the May contract can close above 2250, look for 2285 to be tested. With the recent change in production expectations, boost in demand and technical support – 2300-2400 prices are once again realistic price targets for cocoa in 2018.

Cocoa May ’18 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.