Softs

Tug-of-War Between Supply and Demand in Cocoa Futures

Posted 02/13/2020 8:05AM CTPeter Mooses

March cocoa futures hit a multiyear high last week as the market attempted to touch 3000. The supply side of the fundamental equation is bullish. Weather premium is in prices due to patterns in West Africa. Harmattan winds tend to affect the crop this time of year, this mixed with the dry season coming to an end, could see production data down. These factors have provided support for the traders who are long.

The weakness and uncertainty in demand has not allowed prices to cross 3000. If demand were to increase, 3200 is attainable. Asian grinding data will be a good indicator moving forward. With the Coronavirus and that region of the world not functioning normally (with imports and exports mainly), how long the market will be negativity impacted by the virus is anyone’s guess.

Technically in the short-term a close above 2915 is needed to reaffirm the move higher. If these current levels fail, a drop back down to 2850 isn’t too far-fetched. The COT data being released Friday after the close will show us if we are in store for some more long liquidation.

Cocoa Mar ’20 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.