Outlook of Supply Surge Sends Cocoa Futures Plummeting

Cocoa futures appears to have made a turn around today after news from a prominent agri-bank forecasted the largest surplus of cocoa beans in six years. Cocoa futures ended the session down 18 points today with trading settling at $2,963 per ton at the Intercontinental Exchange in London.

Last year cocoa futures were the top-performing commodity with reportedly the longest rally in the London Exchange’s history since 1989, and cocoa farmers spanning from Africa to South America are said to be gearing-up to revive supplies for next season. The problem is with demand for cocoa said to be slowing, the risk is for cocoa futures prices to join the other dozen or so flailing commodity markets.

Nicholas Medina, a futures and options specialist for Capital Trading Group in Chicago, shared his fundamental view of the cocoa futures market by stating,International farmers, in this case cocoa, sometimes have a short-sighted view of the future after a market has been so successful last season.” Medina adds,The cocoa (futures) market has seen four years in a row of good years has surely motivated farmers to increase production.”

The trend in cocoa futures is clearly down with no bottom yet in sight. Hopefully cocoa (futures) products will start reflecting lower consumer prices reversing the trend of these past few years.

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