As traders turned their focus to the July cocoa contract, we saw prices fall sharply earlier this week. After the steady decline we saw in prices throughout March, April appeared to be forming somewhat of a recovery as equities moved higher. The continued vaccine rollout paired with reopenings gave the food markets some sense of hope for a recovery in demand. 

Problems with potential vaccine side effects have some people hesitant to get vaccinated, refusing the vaccine or waiting for more information to be released during this live trial. Until herd immunity is reached, we won’t truly have an idea of whether or not an end to this pandemic is in sight. For now, traders should continue to monitor the equity markets, currencies, and macro reports being released to gage how far into the “recovery” we are. 

Cocoa futures rely heavily on supply and demand news, so until demand increases or there’s a real issue with production, look for trading to continue to look like this – sideways, followed by short-term dramatic moves as news breaks. Traders who are anticipating a longer-term recovery and want exposure to the market should continue to look at buying calls in further-out months.

June Cocoa Daily Chart

Source: Tradingview

If you are interested in discussing the soft commodities further contact pmooses@rjofutures.com .