This week, global cocoa prices have fallen to their lowest levels in nearly two years. Analysts warn that the commodity is currently oversold, and prices could rebound sharply.
On October 8, U.S. cocoa futures for December delivery dropped 1.4% to around $6,090 per metric ton. This session extended cocoa’s losing streak, after futures had already lost 10% in value during the week ending October 3.
This marks a significant shift in the price trend of cocoa, a commodity that has remained elevated for the past two years. In mid-December last year, U.S. cocoa prices peaked at $12,931 per ton. This week, prices hit their lowest point since early 2024.
Trend of global cocoa prices
Difficult farming conditions, pest infestations, and export restrictions from West African countries had driven global cocoa prices higher in recent years. However, the upward trend stopped last week. Two of the world’s largest cocoa producers raised the minimum price paid to cocoa farmers.
Analysts from investment bank Citi warned that the cocoa market is currently in an oversold condition. Short positions in cocoa have risen to their highest level since August 2022. This means that if these short positions rapidly closed, cocoa prices could surge dramatically.
Short-selling pressure is not limited to New York. In London, cocoa contracts have also been heavily shorted. Analysts from Societe Generale noted that funds switched to net short positions in cocoa this week. Therefore, they made the market vulnerable to a short-covering rally. While cocoa in New York is also susceptible to short covering, it’s not as extreme as in the London contracts.
Harvesting cocoa
Short covering occurs when investors buy back borrowed assets to close out their short positions, either to take profits or cut losses. If many traders rush to cover their shorts, it can trigger a sharp price spike.
Strategists at JP Morgan wrote in a report this week that signs of a cocoa price recovery are beginning to emerge. According to the report, the recent increase in farmgate prices in Côte d’Ivoire and Ghana has encouraged farmers to sell more of the new crop. This has boosted supply and led to price drops in both the U.S. and U.K. markets.
However, the report also noted that the total open interest in cocoa futures and options is rising from historic lows. It is returning to levels seen in February 2025, when U.S. cocoa futures briefly traded above $10,000 per ton.
Vietnamese source: https://vneconomy.vn/gia-cacao-the-gioi-giam-chong-mat.htm