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Cocoa still probing both sides of long and short

Posted 09/08/2017 9:02AM CT | Hector Galvan

The cocoa market continues to puzzle the trade, which for weeks has given the market time to find solid direction.  We closed Thursday around 1900 in the December contract on some light liquidation, but the short week has done little to animate prices.  Therefore, what should we be on the lookout for as we go into the next couple of weeks?  I would argue that we will need to closely watch the weather projections that should give us a better picture of future yields.  In my last article, I mentioned the idea that we may have less cocoa just on the idea that no one wants to produce for free.  The value of cocoa is nowhere near where it was a year ago, let alone six months ago.  The main crop in Ivory Coast for example runs from October to March.  If we were to have poor weather push that starting period to November, you could see much less cocoa come to light at the end of the season.  This in addition to the idea of less producers stepping up to farm cocoa this season sure does help build confidence in possibly higher cocoa values by the end of 2017.  One might look at the consistent range that we have been in since the month of April as one piece of proof that we have reached a point where the market needs more information.  Granted, one can never tell what the future will bring, but should the crop in West Africa come in less than anticipated I imagine a slew of volatility by the end of the year. 

 

Dec ’17 Cocoa Daily Chart

Dec '17 Cocoa Daily Chart

Hector Galvan