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The near complete lack of resting buy orders under the market sparked a collapse in prices yesterday and this could be a good indication that the market is just too overvalued. Recent higher prices have been supported by the idea that world demand growth would be significant this year. However, a return to the debt problems in Europe and a weaker world economic outlook helped to pressure the market yesterday as it managed to collapse $147 in just one minute as stops were activated and there were no new buyers. September cocoa came under heavy pressure yesterday highlighted by this collapse. While a sell-off in the British Pound added to the negative tone, pressure for most commodity markets due to a flare-up of risk aversion out of the Euro Zone added to the severity of the sell-off. Continued tight supplies and relatively high price levels in the Ivory Coast may encourage further smuggling of cocoa beans across the border from next-door Ghana. The wet weather in the Ivory Coast is likely not enough to provide continued support to the market unless rains continue well into July. Heavy rains are causing concern for this season’s mid-crop in West African production areas. Producers indicate that after three weeks of rains, the crop needs periods of good sunshine in order to promote flowers and small pods and in order to avoid disease. A few days of sunshine should help promote a better mid-crop outlook. ICE cocoa Warehouse stocks were down 15,017 bags to 4.183 million bags.
TODAY’S GUIDANCE: The market lacks the commercial support to push higher and specs hold a hefty net long position and are vulnerable to long liquidation selling.
TODAY’S MARKET IDEAS: Selling resistance for September cocoa should emerge near $3008 and $3030 with $2822 as an initial downside target.
Cocoa Market Commentary – 2010.06.30
by Terry Roggensack on June 30, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The near complete lack of resting buy orders under the market sparked a collapse in prices yesterday and this could be a good indication that the market is just too overvalued. Recent higher prices have been supported by the idea that world demand growth would be significant this year. However, a return to the debt problems in Europe and a weaker world economic outlook helped to pressure the market yesterday as it managed to collapse $147 in just one minute as stops were activated and there were no new buyers. September cocoa came under heavy pressure yesterday highlighted by this collapse. While a sell-off in the British Pound added to the negative tone, pressure for most commodity markets due to a flare-up of risk aversion out of the Euro Zone added to the severity of the sell-off. Continued tight supplies and relatively high price levels in the Ivory Coast may encourage further smuggling of cocoa beans across the border from next-door Ghana. The wet weather in the Ivory Coast is likely not enough to provide continued support to the market unless rains continue well into July. Heavy rains are causing concern for this season’s mid-crop in West African production areas. Producers indicate that after three weeks of rains, the crop needs periods of good sunshine in order to promote flowers and small pods and in order to avoid disease. A few days of sunshine should help promote a better mid-crop outlook. ICE cocoa Warehouse stocks were down 15,017 bags to 4.183 million bags.
TODAY’S GUIDANCE: The market lacks the commercial support to push higher and specs hold a hefty net long position and are vulnerable to long liquidation selling.
TODAY’S MARKET IDEAS: Selling resistance for September cocoa should emerge near $3008 and $3030 with $2822 as an initial downside target.
Tags: Cocoa, Softs
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