Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Persistent supply constraints keep cocoa prices elevated
Ole Hansen
Head of Commodity Strategy
Cocoa prices have surged significantly in 2024, fueled by supply shortages primarily due to adverse weather and crop diseases in West Africa, rising demand, and market volatility triggering panic buying. After hitting a record high above USD 12,000 in April—nearly five times the long-term average—the New York futures contract entered a consolidation phase, finding support around the USD 6,000 level before rallying 17% this month to USD 7,600.
In April, the International Cocoa Organization (ICCO) raised its cocoa deficit estimate for the 2023/24 season to approximately 439,000 tons, driven by a sharp production decline in Ivory Coast and Ghana due to adverse weather, poor farmgate prices, and the spread of Cocoa Swollen Shoot Virus Disease (CSSVD).
The recent price surge has been fueled by prolonged supply concerns after the Ghana Cocoa Board reduced its 2024/25 harvest outlook by 20%, citing ongoing weather challenges. The main cocoa harvest in West Africa typically runs from October to March, with a smaller mid-crop harvest from April to September.
The extreme volatility over the past six months has sharply reduced trading activity and positioning, with open interest in New York futures markets down to around 133,000 contracts from an average of about 300,000 in prior years. Lower participation reduces the market's ability to absorb sudden bursts of activity, leading to exaggerated reactions, exacerbated by an uncertain supply outlook.
Recent commodity articles:
21 Aug 2024: Weak demand focus steers crude towards key support
19 Aug 2024: Resilient gold bulls drive price to fresh record above USD 2500
19 Aug 2024: COT Buyers return to crude as gold stays strong; Historic yen buying
16 Aug 2024: Commodities weekly: Gold strong as China weakness drags on other markets
9 Aug 2024: Commodities weekly: Calm returns to markets, including raw materials
8 Aug 2024: Sentiment-driven crude sell-off eases, allowing traders to focus on supply risks
7 Aug 2024: Limited short-selling interest observed during copper's recent aggressive correction
6 Aug 2024: Video: What factors are fueling the current market turmoil and gold's response
5 Aug 2024: COT: Broad commodities sell-off gains momentum; Forex traders seek JPY and CHF
5 Aug 2024: Commodities: Position reduction in focus as volatility spikes
2 Aug 2024: Widespread commodities decline in July, with gold as the notable exception
31 July 2024: Crude's month-long slide halted by fresh Mideast worries
30 July 2024: Record demand explains gold's current resilience
29 July 2024: COT: Energy and metals selling cuts hedge fund long to four-month low
4 July 2024: Sluggish US economic indicators boost demand for gold and silver
4 July 2024: Podcast Special: Quarterly Outlook - Sandcastle Economics
2 July 2024: Quarterly Outlook - Energy and grains in focus as metals pause
1 July 2024: COT: Crude long builds ahead of Q3 while grains selling accelerate
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