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Higher Demand, Higher Prices in Cocoa

Posted 10/25/2017 8:40AM CT | Peter Mooses

December cocoa has formed a bullish channel since late August, as depicted on the chart below. Although the market has found ranges, it continues to move higher. After last week’s whispers of demand turning bullish – this week’s sessions have pulled the market lower. Technically, the market was able to break and hold above 2100 for a few days. The December contract was even able to trade above 2150, but that was short-lived. The market will need to break 2185, and new support levels need to be held in order to have a breakout away from this recent channel. Supply issues from West Africa could add to the recent volatility and keep the trade in this recent range of 2080-2120. Last week’s grinding data showed that the improving global demand for the product may be a new longer-term trend. Ivory Coast’s 17/18 production seems to be 20% behind last year’s growth. The pods in West Africa are getting some help with the recent warm, dry weather. Pod disease has been an issue as we saw in Cameroon – production numbers have taken a hit there due to the recent outbreak and wet pods. Supply and demand will be the story of Q4 as we head into years end and move focus onto the 17/18 crops.

 

Dec ’17 Cocoa Daily Chart

Dec '17 Cocoa Daily Chart

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Peter Mooses

Senior Market Strategist
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.
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