The cocoa market has experienced very strong growth since the start of this week, as concerns arise about the current harvest in Ivory Coast. Currently, the harvest is going smoothly and shipments to ports are up to 30% higher than last year. However, recent heavy rains in some parts of the country have caused mold to form in dried cocoa beans and some shipments are not being accepted by traders. Additionally, drought and high temperatures in other regions threaten cocoa trees as the “mid-season” approaches, which begins in April. However, the rains are now crucial in view of the current main season. Excessive amounts of rain are causing supply problems and could lead to tree disease and mold growth during the final key period of the main harvest in December. At the same time, we are seeing a further decline in cocoa stocks at New York ports (cocoa for forward delivery), which are now at their lowest level since 2005.
The price of cocoa increased by around 17% this week. The price is now at its highest level since mid-October and testing the zone around $8,200 per tonne. The uptrend line was broken yesterday. The current rise appears to be speculative, but further supply issues could lead to a breakdown of resistance near $8,400 per tonne. The path will then be open towards resistance near $10,000. The last time cocoa reached these levels was in June.
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