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.