Cocoa Outlook October - December 2015 : In my Q1 report, I wrote, "The deficit and increasing consumption should drive prices higher in Q2 - also, any supply side woes could cause cocoa to take off to the upside." Cocoa was the second best-performing commodity overall in Q2 and the best-performing soft commodity. In Q3, Cocoa corrected to the downside; it depreciated by 4.74% and is up by 7.01% so far in 2015. Cocoa beans rallied 7.82% in 2014. The range in cocoa was trading during the first nine months of 2015 was $2,667-3,389 per ton. Cocoa closed on September 30, 2015, at $3114 per ton on the active month ICE December futures contract. The downside correction from $3,341 came during the final two weeks of Q3.
The demand for chocolate confectionery products primarily from Asia has caused the price of the commodity to increase over recent years. The cocoa market has displayed all of the characteristics of a demand-based bull. One must remember that in the world of commodities, supply-side rallies are generally sharp, volatile and short-lived while demand-based rallies tend to be slow and steady with many pullbacks along the way. The Chinese have developed quite a taste for chocolate, and as most people will attest, once you taste the delicious treat, there is no turning back.
The rally in cocoa started back in late 2013, and since then, every price correction has been another buying opportunity. The world's major producers of cocoa beans are the West African nations of the Ivory Coast and Ghana. Between them, they are responsible for around 60% of the world's production. Recently, the output in Ghana has dropped. Additionally, El Nino-related weather issues could propel cocoa into the stratosphere in the months ahead.
Cocoa Outlook for Q4 October - December 2015
Every price dip in 2014 was a buying opportunity in cocoa. The rally has been demand based; China and Asia are buying more cocoa beans and consuming more chocolate than ever before. Supply problems in Ghana have caused a demand-based rally to incorporate supply issues into the mix; this could be the best of both worlds for cocoa bulls.
Daily historical cocoa volatility is at the 15.39% level, slightly lower than last quarter. In March 2011, cocoa traded at all-time highs of $3,826 per ton. At the end of Q2, I wrote, "A deficit, supply problems and increasing consumption should drive prices higher in Q3," cocoa moved marginally lower during the quarter that just ended, but it did trade to highs of $3,341 on September 18 before profit taking and selling took prices lower. Now, any effects from El Nino could make this market explosive and propel the price to new all-time highs. One needs to exercise caution in a market like cocoa; the higher it goes, the greater the chance of sharp and violent downside corrections. Therefore, I continue to favor buying price dips in this market to take advantage of corrections and taking profits on rallies, as I believe cocoa will continue to make higher lows and higher highs for fundamental reasons
thank you very much your opinion,
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