Cocoa Futures Market News and Commentary
September ICE NY cocoa (CCU19) on Tuesday closed up by +9 (+0.37%) and September ICE London cocoa #7 (CAU19) closed up by +14 (+0.77%). Cocoa prices recovered from early losses Tuesday and closed higher on fund short-covering. Sep NY cocoa had posted a 5-week low Tuesday and Sep London cocoa fell to a 1-1/2 week low on an unexpected decline in demand. Tuesday's data from the European Cocoa Association (ECA) pressured cocoa prices as it showed European Q2 cocoa processing unexpectedly fell -3.2% y/y to 344,890 MT, weaker than expectations of +2.0% y/y and the weakest level for any quarter in two years. The outlook for a bumper cocoa harvest in the Ivory Coast, the world's biggest cocoa producer is also negative for cocoa prices after Monday's data from the Ivory Coast government showed that Ivory Coast cocoa farmers sent 2.14 MMT of cocoa to ports from Oct 1 through July 14, up +14.4% from the same time last year. Cocoa prices were already on the defensive after Barry Callebaut, the world's top cocoa processor, said last Thursday that global cocoa supply and demand are expected to remain balanced over the near-term as it reported global chocolate sales rose +0.9% y/y during Aug-April. Another potential bearish factor for London cocoa is an extremely long position by funds after last Friday's weekly Commitment of Traders (COT) data showed that funds boosted their net long positions in ICE cocoa futures by 5,465 contracts in the week ended July 9 to a 13-month high of 58,000 contracts, which increases the threat of long liquidation pressure. Cocoa prices have support from concern about a smaller cocoa crop in Ghana, the world's second-largest cocoa producer. A report on Jul 1 said Ghana's main-crop 2018/19 cocoa harvest this year will fall to a 3-year low of 776,418 MT, below forecasts by the Ghana Cocoa Board for a cocoa crop of 800,000 MT. Ghana's cocoa crop has been ravaged by the outbreak of the swollen shoot virus that causes smaller cocoa beans and reduces yields.