After rising by more than 50 per cent in the first four months of 2018, the cocoa price in New York has plunged by 20 per cent since early May.
The price also failed to recover when, at the end of May, the International Cocoa Organization (ICCO) abandoned its previous forecast of a 105,000-tonne surplus in the 2017/18 season and now envisages only an almost balanced market. This was despite optimistic assumptions about production in Côte d’Ivoire Coast and Ghana, the two largest producer countries.
Commerzbank Research said it seems that the market had long regarded the ICCO’s predictions as ‘overly optimistic.’ Significantly more pessimistic assessments for Ghana and for the Ivorian mid-crop were often made.
“Now, however, the latest (unofficial) shipment data are better than these more critical assessments had assumed,” Commerzbank said. “Price trends are also likely to have been influenced by short-term-oriented market participants. Between December and mid-May, they switched their positioning from net short to (considerably) net long.”
However, according to agency reports, farmers in Côte d’Ivoire fear that insufficient rainfall could hamper the remaining mid-crop. If this is reflected in the shipment data, the price could rise quickly again.