The cocoa market is trading lower this morning as we come to the end of the week. It has been a tough week for many investors who believed that we had finally seen the end of a range bound market. However, I would argue we are still in a period of opportunity when it comes to cocoa. It is an opportunity to take advantage not only of the range, but the idea that eventually the market may finally find a long term up trend on a change in supply and demand. First, the market has been trapped in a range for some time now. Looking at the chart one can set up strategies that take advantage of buying the market should it fall back to the 1850 level and sell it should it go and not break the 2080 level. This has been the range since mid-April and may continue until we catch a solid catalyst to aid in the markets breakout. Secondly, I would point to the argument that as we move forward producers in the cocoa growing nations of Ivory Coast and Ghana will grow tired of cheap cocoa and move on to other marketable crops. In time, as we see less growing interest, this should be supportive for prices on a product that still continues to show consistent demand. We have seen that demand for cocoa liquor and powder continue to grow in all three measurable sectors. The cocoa grinds in Europe, North America, and Asia have illustrated that people have not turned their back and that we may continue to see better grind numbers going forward.
Dec ’17 Cocoa Daily Chart