① Higher margin requirements and supply uncertainty pushed traders out of the market, causing sharp price fluctuations; ② Rainfall in West Africa boosted mid-term harvest prospects. Although it may not be enough to completely fill the supply gap, it also caused hedge funds to continue to cut bullish bets.
Financial Services Association, April 30 (Editor: Niu Zhanlin) On Monday EST, New York Cocoa Futures once plummeted by nearly 17%, the biggest one-day decline in more than 60 years. Higher margin requirements and supply uncertainty forced traders to withdraw from the market, causing sharp price fluctuations.
Specific market conditions show that New York Cocoa Futures jumped low on Monday, continuing the recent decline. By the time of the US trading session, prices began to drop sharply, and at one point fell below the 9,000 US dollar per ton mark. Two weeks ago, it reached a record high of 12,261 US dollars per ton.
In fact, after the Intercontinental Exchange announced last Thursday that it would increase margin requirements for trading cocoa futures, the price of this commodity began to fall all the way down.
According to the data, there has been a sharp decline in New York Coco Futures open positions, and the total number of open positions is close to the lowest level in more than 10 years. Lower interest in holding positions may mean fewer market participants and lower liquidity, which may result in more drastic price fluctuations.
Leonardo Rossetti, an analyst at StoneX, commented that the increase in trading margin requirements and the drastic reduction in the number of open positions have opened up more room for trend reversal, and the reduction in investors will cause more drastic fluctuations.
Earlier, some analysts warned that for Coco traders, trading is becoming more and more risky because of fewer open positions and higher margin requirements, making market fluctuations more unstable, leading to a significant increase in the risk of trading losses.
Looking at the supply side, rainfall in West Africa has boosted mid-term harvest prospects. Although it may not be enough to completely fill the supply gap, it has also caused hedge funds to continue to cut bullish bets.
According to data from the US Commodity Futures Trading Commission (CFTC), fund managers cut net long positions to their lowest level in more than a year for the week ending April 23.
It is currently the cocoa harvest season. Faced with a huge gap in supply, the Nigerian government said it hopes to expand the area under cultivation and increase production to four times the current level by 2026. Local growers said they have increased related investments to about double production to 500,000 tons this year.
Hightower analysts said in a report released last Friday: “The shift to humid weather in West African growing regions should bring some benefits to the region's upcoming production.”
However, trade and agriculture consultant Paulo Torres claims that the shortage of cocoa is not over yet, and Ghana and Côte d'Ivoire, the main producers of cocoa, have lowered their production targets for this year.