On Thursday, cocoa prices dropped to a week’s low due to better-growing conditions in West Africa, which could increase the crop’s yields.
US cocoa futures for September delivery declined by -0.71% to $7,788.50 per metric ton (MT) on July 18’s Asian afternoon session.
According to weather forecasts, rain showers are expected to resume this week in several growing regions of the country. The favorable conditions are said to keep soil moisture optimal for crop growth.
In London, losses for the commodity accelerated after the British pound increased to a year high. The boost in the currency pressures cocoa prices in terms of sterling.
More substantial contract margins pushed traders to cut their positions, leading to thin trading conditions and aggressive volatility. Moreover, aggregate open interest in chocolate’s primary ingredient futures has hit near the lowest level since 2010.
Another bearish factor for its prices was Ghana’s projection, stating that 2024/25 production will rebound to 700,000 MT. It went up from 425,000 MT in 2023/24, driven by good weather conditions that boosted yields.
On the other hand, cocoa prices benefitted from potentially persisting global shortage issues. Reports claimed that Ghana plans to delay the shipment of around 350,000 MT of beans to the next season amid the country’s poor crops.
Ghana Delayed Cocoa Delivery Risks Loss
Significant trading houses risk losing around $1.00 billion amid Ghana postponing its cocoa beans delivery this year. As a result, traders were forced to exit their short positions when prices surged.
The region aims to hold back shipments of up to 350,000 MT of the crop this season, almost half of what was sold.
Traders would buy cocoa beans in advance to resell at a profit. Also, they bet on price falls in the futures market to protect against drops.
Moreover, traders anticipate getting their cocoa and taking new short positions for May 2025 shipments at $7,000.00 a ton. However, if they obtain the physical cocoa for $3,000.00 a ton, they anticipate losses costing $4,000.00 per ton.
