Predictions of rain in Ghana, Ivory Coast and Indonesia offset cocoa prices May 14, 2024 to a 60-year biggest weekly drop.
New York futures markets registered a fall of 19% week-on-week in the best-performing contract while London experienced an 18% drop. The two marked the steepest decrements in the past 1 week and the sharpest in some 60 years.
Early morning of May 15, 2024 however registered a price rally in New York and London after the above sharp retreat.
3-Week Performance Comparison
Cocoa prices dropped less in the first and second weeks of May 2024 than in the week starting May 13.
The price per tonne slumped to $7,598.62 on May 14, for the most active contract in New York. This was a rapid decrement from the May 6, 2024 settlement of $9,463.34 per tonne.
In comparison, two weeks earlier on May 1, 2024 the price had crossed over from the $10,000-mark to $9,790.17 a tonne.
On May 15, however, volatility saw July cocoa futures recover by 2.61% in New York and 3.73% in London.
Low Trade Volume Affects Cocoa Price
Volatility is stemming from low traders’ interest in cocoa due to lack of supplies, postponed purchases and low funds. For this reason, any remote occurrence such as the forecast of rain is having a big effect on price.
The promise of wet weather means that the prices will remain low for sometime as rain has boosted traders’ morale and increased market liquidity. So, traders can now stake large sums, a thing they had given up on early May after buyers postponed purchases.
According to Maxar Technologies, rain in the world’s top cocoa producers, Ivory Coast and Ghana, should boost cocoa growth conditions. This could also have a positive effect on trade volumes which currently are lackluster.
With the return to rains, concerns about low supplies in West Africa that had fueled the price spike will diminish. Indeed, insufficient supplies had helped bring the historical cocoa price peak above $12,000 a tonne on April 19, 2024.
Therefore, as traders reluctantly stage a comeback with the promise of rain, the cocoa price is naturally showing volatile retreat.