2024-05-05 14:46:07 ET
Summary
- Cocoa prices experienced a strong rally, quadrupling in price, before experiencing a recent reversal. Supply issues and poor market liquidity have increased price volatility.
- Global demand for cocoa remains strong, with quarter-over-quarter grindings increasing in all regions.
- Latin American cocoa growers may increase production, but it will not be enough to fill West Africa's severe supply deficits in the near-term.
- Invesco DB Agriculture Fund ETF offers an opportunity, albeit partial, to participate in cocoa's longer-term bullish trajectory.
For many years, the price of cocoa drifted in a relatively well-defined range. As late as 2020, I wrote about trading that range from my perspective as a cocoa permabull. Unfortunately, liquidity in the iPath® Bloomberg Cocoa Subindex Total Return((SM)) ETN (NIB) dried up over time, and NIB was finally delisted in June 2023. The loss of the best vehicle for retail investors to participate in cocoa trading coincided with a with strong rally in cocoa. The very next month, the price of cocoa broke out and proceeded to quadruple in a stunning run-up. The weekly chart below of the cocoa cash contract showcases the scale of the move. The price accelerated in a parabolic move that only ended after a quadrupling in price....
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For further details see:
Navigating Cocoa Prices: A Quick Primer On Market Trends And Trading Strategies