Softs

Short-Term Cocoa Recovery Halted by Demand Issues

Posted 04/23/2021 8:39AM CTPeter Mooses

As traders turned their focus to the July cocoa contract, we saw prices fall sharply earlier this week. After the steady decline we saw in prices throughout March, April appeared to be forming somewhat of a recovery as equities moved higher. The continued vaccine rollout paired with reopenings gave the food markets some sense of hope for a recovery in demand.

The problems with potential vaccine side effects have people hesitant to get vaccinated, refusing the vaccine or waiting for more information to be released during this live trial. Until herd immunity is reached, we won’t truly have an idea if an end to this pandemic is in sight. For now, traders should continue to monitor the equity markets, currencies and macro reports being released to gage how far into the “recovery” we are.

Cocoa futures rely heavily on supply and demand news, so until demand increases or there is a real issue with production, look for trading to continue to look like this – sideways followed by short-term dramatic moves as news breaks. Traders who are anticipating a longer-term recovery and want exposure to the market should continue to look at buying calls in further out months.

Cocoa July ’21 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.