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While May cocoa continues to trade within a well defined range, yesterday’s price action also shows a lack of strong speculative buying interest in this market. Cocoa fell despite a weaker trade in the dollar yesterday and it couldn’t attract strong enough buying interest to even lift the market back to resistance at $3,188. The latest COT report with options for cocoa shows speculators continuing to reduce their net long position, particularly managed money and trend following funds. May cocoa lacks upside traction even though there continues to be reports of more widespread and violent political protests in the Ivory Coast and that clearly shows the government upheaval isn’t thought to be a supply threat yet. Since the main harvest in the Ivory Coast is nearly complete and production continues to outpace last year’s levels, the political turmoil in the Ivory Coast has not become a bullish catalyst, especially since good growing conditions for the mid-crop leave the supply outlook favorable. It must have also been disappointing for the bull camp yesterday to see cocoa slump despite a major cash trading company predicting world cocoa demand to rise marginally this year. The London cocoa market is looking a bit shaky and overbought at these higher price levels following a sizable rally from the February low. If the London market starts to back peddle, it will likely end up being a factor that drags the NY cocoa market lower. ICE cocoa warehouse stocks stand at 4.227 million bags, up 84,887 bags.
TODAY’S GUIDANCE: The weaker trade in the Dollar overnight seems to be providing cocoa with some early price support. But so far the currency action hasn’t been enough of an influence to push May cocoa out of the $2,988 to $3,200 price range. Unless the political situation in the Ivory Coast begins to impact cocoa business, May cocoa appears to lack a bullish catalyst to support a significant move higher.
