Cocoa prices fell sharply last week. A jolt that reflects hopes for a better harvest, but is also linked to this particular time of year: July is traditionally a busy month on the cocoa market.
Minus 29% on the London Stock Exchange, minus 14% on the New York Stock Exchange, cocoa prices fell into free fall last week. A drop that can be explained by several factors, but it is difficult to know which one has the most influence on the prices.
First, there is renewed hope on the weather front: since mid-June, rain has been regular in Côte d’Ivoire, after months of excessively dry weather that caused the plantations to suffer. The rain was so eagerly awaited that some Ivorian cocoa players are starting to dream of a production that would recover to 1.8 million tons, or even 2 million, for the next harvest in September-October, the one we call ” to the main ones ” – or 400,000 to 500,000 tonnes more than last year. The prospect of such a rebound in production is in itself an element that can explain the drop in prices after an unprecedented surge in prices for over a year.
Disinterest of investment funds
According to some observers, the decline observed on the stock market would be mainly technical, in the sense that it reflects financial mechanisms. Investment funds that had been passionate about cocoa in recent months would have stopped betting on a price increase and started to massively resell their contracts, according to the Financial Timeswhich is based on data from the US Commodity Futures Trading Commission (CFTC). Which gives the impression that there is more cocoa on the market.
« Fight » on beans deliverable in July
What may also be at play is the expiration of the July contracts in two weeks: we are talking about advance purchase contracts, for beans that will be delivered this month. Traditionally, ” July deadline marked by high volatility “, explains a representative of a multinational, because ” There is a fight over the beans “, six months before Christmas.
Which means that the drop in prices is probably not, for the moment, part of a fundamental movement: the trend could very well reverse in the coming days.
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