2024-04-29 18:41:22
Cocoa futures prices traded on the ICE exchange fell more than 14% on Monday, posting the biggest one-day loss on record, as speculators decided to liquidate some of their long positions in the commodity and take profits.
Cocoa is currently the most popular commodity on the market, with prices jumping 60% last year and more than 100% since the start of the year. The disastrous production situation in West Africa, where most of the beans are grown, is behind the sharp rise in prices.
This increase, however, showed signs of weakness last week, when prices did not continue to rise. Market experts believe that this was the signal that investors were waiting for to start putting money in their pockets.
“Today’s action appears to be a long overdue corrective decline, in my view, due to weakening technicals,” said a New York-based cocoa trader.
“I think the market is overwhelmed by liquidations of long positions, short selling and a lot of intraday trading,” he said.
“What we’re seeing today is a technical sell-off,” said a second US trader, adding that some investors have also started to short the market, betting that prices have peaked.
July New York cocoa on the ICE fell $1,663, or 15.7 percent, to $8,931 per metric ton. July cocoa in London fell 14.5% to 7,678 pounds per tonne.
Despite the sharp daily loss, the state of the cocoa market has not changed, said Leonardo Rossetti, commodity analyst at broker StoneX.
“Market fundamentals are still strong. Supply is tight and demand is resilient, so I don’t see this market deepening too much,” he said.
Rossetti noted data released on Monday for cocoa entries in Ivory Coast, the top producer, which is down 29% for the season.
In other commodities, July robusta coffee gained $13, or 0.3%, to $4,164 a tonne. The contract hit a record high last week at $4,338.
The robusta coffee market is also very tight on the supply side, with concerns about hot and dry weather in Vietnam, the main producer of robusta.
July Arabica coffee rose 1.6% to $2.2750 a pound.
May raw sugar gained 4.1% to 20.20 cents per pound. Traders said about 1 million to 1.5 million tonnes of sugar, mainly Brazilian, was due for delivery under the May contract which expires on Tuesday.
August white sugar rose 1.8% to $573.80 per tonne. (Reporting by Nigel Hunt and Marcelo Teixeira; Editing by Shailesh Kuber, David Evans and Tasim Zahid)
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