Cocoa futures declined slightly on Wednesday, with the commodity falling under pressure as investors started to gauge the harvest in top producer West Africa.
General consensus is that the crops in West Africa are “very good” according to Rabobank analyst Carlos Mera. “I think the risk of crops being bigger than expected is higher than that of it being lower than expected. The mood in the market is neutral to bearish,” he added. West Africa is beginning the larger of its two harvests and right now and good weather has boosted the health of the crop. Yields in the first harvest, earlier this year, were disappointing after a bout of dry weather in the region meant smaller beans.
Globally, for the 2015-2016 season, the International Cocoa Organization estimated the world grind would rise just 0.19% versus the average rise of 3.5%. This puts an increasing amount of pressure on crop yields of the current harvest.
December New York cocoa rose 0.3%, to $2,707 per ton, in the after hours session, the commodity was gaining extra impetus, with prices up over 1% at $2,722 per ton. The commodity was finding support at $2,629 and meeting resistance at $2,803. Technical indicators have the commodity rated as a strong sell. Technical and fundamental selling pressure can be expected at the start of harvest season of any soft commodity, with the knowledge that new supplies are about to come online. This pressure tends to reverse as harvest season continues, unless of course harvest levels are high and then downside pressure could mount.