Bulls Losing Their Cocoa Cravings?
Today’s Spotlight Market
Here are the results from the first quarter Cocoa grindings report for North America and Europe:
????????????????????????? Q1 2015????????? Q1 2014?????????? Percentage change
North America:?? 121,508 mt????? 129,007 mt????????????????? -5.81%
Europe:???????????? 337,706 mt????? 343,062 mt????????????????? -1.60%? ?
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Fundamentals
Cocoa bulls appear to be losing their chocolate cravings, as prices have fallen over $700 per ton the past 6 months. The latest bearish news came from the National Confectioners Association which released their report on first quarter North American Cocoa grindings last week. The report showed Cocoa processors? grindings fell to 121,508 metric tons (mt) in the first quarter of 2015, vs. 129,007 mt in the first quarter of 2014. This was 5.8% lower year-over-year and the lowest grinding totals since 2012. While European Cocoa grindings were better than anticipated at 337,706 mt, the total was still down 1.6% from year ago levels. Amongst the headwinds seen for Cocoa prices and commodities in general is the strength in the U.S. dollar, which makes commodities more expensive for non-dollar users.
As we move further into the second quarter, traders will turn some of their focus to crop conditions in West Africa and, in particular, the Ivory Coast, which is the largest Cocoa producing nation. Recent rainfall there has helped to elevate some of the concerns of the hot and dry conditions that had plagued parts of West Africa earlier this season. The wild card this season may come from Ghana, where analysts are puzzled by a discrepancy in the estimate for this season?s production from the nation?s industry regulator, Cocobod, and private forecasters. Cocoabod has this year?s harvest totaling 850,000 mt, while private forecasters are looking for production to fall to around 750,000 mt due to disease and a reduction in government support for producers. Depending on where actual production falls, this could be the difference from a market being adequately supplied and a Cocoa deficit for the 2014-15 season.
Technical Notes? -? View Today’s Chart
Looking at the weekly continuation chart for Cocoa, we notice that the uptrend line that was drawn from the March 2013 low has been broken to the downside. Currently prices are sandwiched between the 20- and 200-week moving averages, and the 14-week RSI has started to turn lower, with a current reading of 43.01. Some technicians may argue that the recent price decline is actually a bull flag formation, but we would need to see a close above the recent high at 3116 to confirm the bullish technical pattern. 2669 is seen as the next support level for the July futures, with resistance seen at 3116.???
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