Cocoa futures, have lost more than 27% over the past two sessions, approaching a record two-day low, dating back to 1960. The near 20% rebound from the local lows may signal that while liquidity is tight and the market remains concerned about supply constraints on the commodity as West Africa, which accounts for more than half of the world's supply, grapples with weather challenges, an aging tree crisis and plagues that limit cocoa harvests. Cocoa futures are currently gaining nearly 3% and have already managed to rebound nearly 20% from yesterday's local monthly minima near $7700 per ton.
- Agricultural products analysts at Marex Group have signaled that speculative moves in the cocoa market are disconnected from the market's supply and demand balance; rather, they have to do with the dynamics of supply hedging and scarce liquidity. The big jump in cocoa prices earlier this year meant that investors hedging their positions with short positions had to deposit more funds, covering massive margin calls, acting like an insurance policy;
- The mass closing of short positions reduced the number of open contracts, reducing liquidity. According to J.P. Morgan, this has made it difficult for many chocolate companies to hedge supply in the futures market. Despite this, however, shares in Barry Callebaut (BARN.CH), the largest global conglomerate linked to the chocolate market, managed to recover losses and are trading near CHF1,500 per share, the highest since December 2023. The market, despite high cocoa prices, is not worried about demand destruction.
COCOA (M30)
Source: xStation5
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appThe content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
