Macquarie Research says cocoa “was the top performing commodity in April,” having rallied 18 per cent since the lows of early March to a five-month high of around US$2,415/tonne.
“This trend not only defies the bearish trend noted in other commodities, but at first glance it also appears at odds with recent news and data releases (larger mid-crop prospects and weak grindings), which at face value appear bearish. However, all may not be as it seems on the both the mid-crop outlook and grindings. A closer look at the fundamentals points to a market that is still precariously balanced, and which could easily fall back into deficit,” said Macquarie.
“We expect some correction in the short term, to back below US$2,300/tonne on speculative profit-taking and more origin selling, as mid-crop supplies start arriving. But from the third quarter onwards we see prices edging up again towards US$2,500/tonne, on the assumption that grindings will recover in the second half of 2013, and that most of the target forward sales at origin will be completed by then.”
Macquarie said the “added uncertainty” over the outlook for the 2013/14 West African crop and third quarter weather risks will provide additional support.