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March cocoa closed sharply higher on Thursday and with good buying being seen on price dips this week, the market seems to be retaining a bullish posture despite global economic conditions. In the overnight trade cocoa has pulled back on profit taking likely tied to a stronger Dollar. While today’s US payroll data may have more potential to knock the market back, cocoa has shown a surprising amount of resiliency this week and so price dips are likely to be short lived as long as a tightening global supply outlook remains in place. One news agency yesterday still showed the pace of Ivory Coast cocoa bean arrivals significantly lagging behind last year’s levels by about 37%. There are also reports of low Ivory Coast bean quality from the new harvest and that seems to be a factor supporting cocoa futures as well. With low rainfall being reported in the Ivory Coast and Ghana, fears of drought conditions developing are also raising supply concerns. A recovery in the Pound yesterday after the Bank of England and the Euro-zone aggressive cutting rates certainly provided currency related price support. But it also seems as if cocoa is being supported by an improving demand outlook given the vast amount economic stimulus being applied by the US, UK and Europe governments.
TODAY’S GUIDANCE: Since cocoa is showing the ability to shrug off bearish outside market influences and trade on its own improving fundamental setup, a technical correction or price break off today’s economic news is likely to be short lived. As long as the trade embraces the outlook for tightening global supply, March cocoa should remain on an upward price path.
