Softs

Cocoa Supply Deficit Could Push Prices Higher

Posted 05/22/2019 9:19AM CTEric Scoles

July ’19 Cocoa has seen solid gains since it’s breakout last week with strong potential to keep rising in price. Cocoa futures are experiencing an inside day currently and have some vulnerability to a pull-back, but technical indicators suggest the over-all trend may continue bullish and fundamentals should support this. While US/China trade talks have caused volatility on market confidence, demand seems to be resilient and may maintain despite recent tension. The supply side concerns of a deficit increase as Ghana’s cocoa regulator Chocobod is currently unable to meet sales commitments as “swollen shoot disease” has affected a larger amount of the crop than expected and The International Cocoa Organization has lowered their production forecast accordingly. First-quarter grindings have set a strong pace and are expected to follow through into the second and third quarters. If this pace remains and production continues to suffer we could see a sizeable deficit this season and this market may provide good opportunity for bulls.

Cocoa Jul ’19 Daily Chart

Cocoa Jul '19 Daily Chart

Eric Scoles

Eric entered the workforce during the summer of 2007 as an apprentice tradesman just before the big crash and recession which followed. The impact of which strongly inspired his interest in the financial industry and began him as a student of the markets. Eric worked throughout the following years developing strong communication skills and risk management practices in the aviation and marketing industries before ultimately getting licensed and turning his passion into a career as a market strategist with RJO Futures.