Softs

Have Cocoa Futures Found a Bottom?

Posted 07/02/2021 8:47AM CTPeter Mooses

As technical selling continues, cocoa futures continue to move lower. It appears traders are beginning to lose patience with waiting on the demand for cocoa to increase. The year is halfway through, covid restrictions are still in place in many key areas of the world for cocoa demand and the Pound continues to add to the market weakness. At this point, the fundamentals – weather, supply, etc have taken a backseat to the macro story.

If the weather patterns in West Africa continue, which are positive for supply numbers, we could see cocoa prices test 2300. The trend on chart is bearish, a change in COT, and a positive change in supply and demand is needed to reverse this. If 2300 is tested with no change in global demand, the remainder of cocoa trading year could end much lower than many expected.

At this point, traders are anticipating a recovery in cocoa prices although the short-term is not promising. Still consider buying further out calls in the December contract for upside exposure in hopes that the world continues to recover.

Cocoa 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.