Cocoa futures’ prices have recently rallied more than 10%. Recent global data is indicating that this trend higher may continue. As an individual commodity, the demand for cocoa is increasing. Key areas of the world for cocoa purchases – Europe and North America, have begun removing Covid restrictions which appears to be boosting the demand in chocolate. The equity markets in Europe and the U.S. have also been strengthening, although still very volatile.
Weather patterns in West Africa have been very dry due to high temperatures, causing some concern in production numbers which could help support prices to stay above 2800. Weather will be a key factor in prices for the short-term. If production is affected later this season, prices could touch new contract highs in the coming months.
Grinding data in the future will also be telling for the outlook of cocoa this year. For now, supply and demand are working together to move cocoa prices higher. Traders should monitor the 2850 level and consider buying calls in further out months if the bullish trend continues.