September has been a good trading month thus far for the bulls in cocoa. December cocoa moved to a multiyear high, but technically stalled around 2720 making that new resistance. Recent findings out of Ivory Coast’s production data shows that there will be a continued decline in supply. This is also being found in other key growing areas in West Africa. Lower production expectations mixed with stronger short-term demand has led to the recent rally in prices.
If restrictions begin to ease and Q4 data is stronger than the first ¾ of the year look for prices to continue to move in this direction. For now, weather appears to be a nonfactor in the soft and this market is mainly being driven by global supply and demand. Traders should continue to follow the technicals on pullback for entry and exit points but keep an ear on any changes to demand.