Commodity Roundup: Cocoa futures face 22% monthly drop as West Africa supply fears ease

Cocoa futures (CC1:COM) ticked lower on Friday, set for their third-straight weekly fall, and biggest monthly drop in at least a year, as improved weather conditions in the key growing region in West Africa calmed supply fears, following a meteoric rise in prices recently.

The most active futures contracts in New York tumbled 5.6% to $7,361 a tonne on Thursday, and its London equivalent lost 10.3% to £7,010 a tonne, as rising hopes that crops in Ghana and Ivory Coast may recover in the coming season triggered a sell-off, the Financial Times reported.

“The year long bull market in cocoa may have finally ended as prices fell by enough to trigger our risk-management liquidation rules,” the report said, citing Eric Crittenden, chief investment office of Standpoint Asset Management.

Cocoa (CC1:COM), down -0.82% to $7,179.18 on the day, was set for an over 22% monthly fall. Futures in New York had surpassed $12,000 a ton in April.

Citi increased its 2024 and 2025 NY cocoa price outlook in April to $7,000/t and $5,000/t, respectively, as prices surged due to lack of supply.​

Dealers have attributed the recent decline to commercial and fund selling, noting that favorable weather conditions in West Africa bode well for the upcoming 2024/25 crop starting in October, as per report. However, they also highlighted that the cocoa market remains extremely tight, with the stocks-to-consumption ratio widely expected to hit a record low by the end of the current season due to poor crops in the Ivory Coast and Ghana.

Elsewhere in the commodities market, oil prices ticked higher on their way to a third-consecutive weekly gain, driven by expectations that the U.S. central bank will soon start cutting interest rates, as traders also positioned for a key inflation data later in the day.

Crude oil futures were also set for a monthly gain ahead of a seasonal uptick in demand and a tight market in the coming days.

However, BMI (a unit of Fitch Solutions) said, it expects further upside to prices will be limited, given a lackluster global economic growth outlook for H224, the scheduled return of OPEC+ barrels from October and ongoing supply growth among non-OPEC+ producers. Maintains forecast for Brent crude (CO1:COM) to average $85/bbl in 2024 and $82/bbl in 2025.

Potentially relevant stocks: SM Energy (SM), Foremost Lithium Resource & Technology (FMST), Skeena Resources (SKE), Suzano S.A. ADR (SUZ), NioCorp Developments (NB), Glatfelter (GLT), Compass Minerals International (CMP).

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