Wednesday’s trading session in cocoa pulled March futures down below 2100. At one point the market traded as low as 2095 – testing key support levels. Cocoa futures closed down around 3.5% for the day, leaving the contract priced at 2109. The market saw follow-through following two down days to start the month. If the market breaks lower, look for 2060 to be tested.

Demand in the soft is still in question as is production estimates. The dry season is currently happening in West Africa, which could affect output. El Nino is also heading that way which could also hurt production. As of now, these are “what ifs.”

Globally, equities and commodities have had a rough week. With the shortened trading schedule on Wednesday, we will see what the markets do to end the week. If the equities continue to slide, look for commodities to possibly follow.

Heading into the final weeks of trading in ’18, look for cocoa to recover from this weak few days. The fundamentals are still mainly bullish – poor production possibilities, end of year demand boost and a technical recovery after oversold levels are hit could lead to the March contract ending the year at 2400.

Cocoa Mar ’19 Daily Chart

Cocoa Mar '19 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.