Cocoa prices fell sharply on Friday, with July ICE NY cocoa down 5.53% and London cocoa down 5.46%, driven by rising inventories that hit a 20.5-month high. The increase in ICE cocoa stocks to 2,668,548 bags triggered long liquidation, overshadowing previous concerns about potential El Niño impacts on West African cocoa production. The NOAA forecasts a 61% chance of El Niño conditions emerging, which could threaten future harvests.
Despite strong earnings from major chocolate producers like Hershey and Mondelez, which indicate steady consumer demand, recent data shows a decline in North American chocolate sales. Additionally, grindings in both North America and Europe fell significantly year-over-year, raising concerns about global cocoa demand. However, tighter supply forecasts from West Africa and disruptions in the Strait of Hormuz may provide some price support.
Market professionals should closely monitor the evolving supply dynamics and weather patterns, as they could significantly influence cocoa prices in the coming months, especially with the potential for short-covering rallies amid excessive short positions.
Source: nasdaq.com