Cocoa Futures Swing as Traders Eye Ivory Coast Supply Risks
TLDR
- Cocoa futures in New York erased earlier gains Monday, retreating from a 5.7% surge
- This came as traders assessed Ivory Coast bean deliveries for signs of supply tightness
- While bean arrivals at Ivorian ports remain ahead of last year’s weather-hit harvest, their pace has slowed in recent weeks
Cocoa futures in New York erased earlier gains Monday, retreating from a 5.7% surge as traders assessed Ivory Coast bean deliveries for signs of supply tightness. The most-active contract saw wild intraday price swings amid thin trading, with 60-day volatility near its highest since October.
While bean arrivals at Ivorian ports remain ahead of last year’s weather-hit harvest, their pace has slowed in recent weeks. This coincides with concerns over the dry Harmattan winds, which threaten the main crop and the upcoming mid-crop harvest in West Africa, the world's top cocoa-producing region.
Sholom Sanik of Friedberg Mercantile Group noted the deceleration in arrivals and warned that Harmattan winds could exacerbate crop stress, further squeezing an already tight market. Cocoa futures have rallied to record highs in 2024, even as aggregate open interest declines, reflecting reduced contract activity.
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Key Takeaways
Cocoa prices are reacting to a confluence of factors that highlight the fragility of global supply chains. Ivory Coast, accounting for over 40% of global cocoa production, is pivotal in shaping market dynamics. While bean arrivals initially outpaced last year, the slowdown raises red flags about long-term supply resilience. Harmattan winds, known for their potential to dehydrate crops, intensify supply uncertainty. This is particularly concerning as the industry also grapples with reduced liquidity and high volatility, reflecting cautious trading amid record prices. The market’s sensitivity underscores how weather patterns and regional production issues in West Africa drive global cocoa pricing. Analysts are closely monitoring the intensity of Harmattan conditions, which could dictate crop yields and extend the supply squeeze into the mid-crop season.
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