After Cocoa Crash, Rabobank Says Bull Rally Likely Peaked 

Rabobank analyst Paul Joules wrote in a note to clients that cocoa prices have likely peaked after crashing in the last several weeks. 

“A combination of weakening global demand and production responses, particularly from countries without a fixed farmgate price, will help alleviate the pronounced uncertainty baked into current futures pricing,” Joules said. 

Still, “it’s likely that inflated cocoa prices will stick around for the next few years,” he noted, adding prices are unlikely to return to “normal” levels quickly but have passed their peak. 

Cocoa futures peaked in New York on April 19, a little above the $12,000 a ton mark, and have since crashed 43%. Prices bottomed at $7,000 and have traded sideways just below the $9,000 level in the last several sessions. 

Traders monitor crop conditions in West Africa, which is the mecca of cocoa growing. The region has been battered by adverse weather conditions and disease, denting harvests and sparking the third annual global deficit. 

New data from forecaster Maxar Technologies shows that precipitation is expected across the Ivory Coast and Ghana over the next five days, thus potentially improving soil moisture in those growing areas. 

In a separate report, analysts from BMI, a unit of Fitch Solutions, noted that the cocoa crash had nothing to do with market fundamentals but everything to do with market liquidity. 

Recall in early April, Bloomberg’s Javier Blas warned:

Liquidity in cocoa markets is quickly evaporating.

The number of outstanding contracts (open interest) in New York and London combined has tumbled 40% since mid-January. NY open interest is at a 12-year low.#cocoa #chocflation

— Javier Blas (@JavierBlas) April 9, 2024

Rabobank estimates cocoa prices in the fourth quarter of 2024 will average around $7,000. 

Meanwhile, commodity trader Pierre Andurand stands by his $20,000 price target for later this year.