On Monday, cocoa prices plummeted on long liquidations triggered by short-term profit-taking despite the ongoing global supply crunch.
US cocoa July futures slumped 6.85% to $11,064.00 per metric ton (MT) on April 22, snapping a three-day rally. Moreover, industry watchers predict a 0.10% drop to $10,910.00 per MT in the coming market session.
The unexpected plunge followed the 8.11% gain the previous week as prices soared to all-time highs. Furthermore, the soft commodity advanced 13.29% this month and 163.68% year-to-date, briefly breaching $12,000.00 resistance on Friday.
Dealers and speculators began liquidating their long contracts shortly after prices peaked at $12,218.00 an MT. As a result, trading volume exploded to 15,000.00 MT, 433.81% higher than 2,810.00 MT on Friday.
Meanwhile, the International Cocoa Organization forecast a 2023/24 cocoa deficit of 374,000.00 MT, 405.41% deeper than the 74,000.00 MT shortfall in 2022/23. In addition, it projected global production to retreat by 11.00% year-over-year to 4.45 million MT (MMT).
Top producer Ivory Coast posted shipments of 1.33 MMT from October 01 to April 21, marking a 30.00% YoY decline. Furthermore, it expects total output for the current crop year to sink by 21.50% YoY to an 8-year low of 1.75 MMT.
Likewise, Ghana estimates an annual yield of 423,750.00 MT, less than half the country’s preliminary forecast.
Supply Crunch Unable to Dent Robust Cocoa Demand
Despite soaring cocoa prices caused by the global supply crunch, resilient demand defied expectations in the first quarter. In North America, grindings increased by 9.30% quarter-over-quarter and 3.70% YoY to 113,683.00 MT, reversing the anticipated 8.00% shrinkage.
Similarly, the Cocoa Association of Asia reported a 5.10% QoQ jump to 221,530.00 MT in the region’s Q1 cocoa grindings. European grindings of the chocolate ingredient also widened by 4.70% QoQ to 367,287.00 MT.
According to market specialists, cocoa prices will likely rise again later this week after the long liquidation concludes. Lastly, they claimed the supply crunch will likely keep prices above the $10,000.00 support level in the second quarter.
