Battered cocoa is finally finding support, and on Monday cocoa futures jumped 5% on concerns that hot weather could threaten the approaching mid-crop in the Ivory Coast encouraged investors to unwind their bearish bets.
Cocoa prices have been under considerable pressure, recently, plunging to multi-year lows amid expectations for a bumper crop in the Ivory Coast but the news that hot weather last week in several regions of Ivory Coast’s cocoa regions could threaten the approaching mid-crop gave traders reason to turn bullish.
US cocoa futures for May delivery were recently up 4.7% at $2,110.50. Daily support was at $1,997 and resistance at $2,037. The commodity has also slashed through its monthly first resistance of $2,101 but is below its second resistance of $2,260.33. While short-term technical support is strong, longer-term technical support is weak.
In the Ivory Coast the dry season runs from mid-November to March, and while little rain is expected and usually priced into the commodity in this time frame, there is concern over the fact that the dry weather is persisting late into the season and could even spill into April. This could cause damage to the mid-crop and lower yields.
The recent weather report showed intense heat and inadequate rainfall in the southern region of Aboisso for the past three weeks and in the eastern region of Abengourou farmers complained that inadequate rain and hot weather is weakening cocoa trees. This region is known for its high-quality beans. Similar growing conditions have been reported in the central western region of Bouafle and in the central region of Yamoussoukro. The only regions with good growing conditions, right now, are western Soubre, southern rDivo and Agboville, and western Duekoue and Gagnoa.