A Historic Drop in Cocoa Prices This Week

Gravity of the Market: What Rises Must Fall

On Thursday, cocoa prices took a downward turn, continuing a weekly slump that is projected to be the most significant in history due to the disappearance of liquidity from large traders. New York futures experienced a drop of up to 9.3%, reaching their lowest point since mid-March, and have plummeted 37.5% from their mid-April peak of slightly over $12,000 per ton.

Record-Setting Decline

If the losses hold steady through Friday, this week's drop of approximately 30% will establish a new record. Bloomberg reports that price fluctuations have become more unpredictable due to a liquidity crisis that has disrupted the market, making it costlier for traders to maintain their positions.

Market Instability and Future Predictions

Jack Scoville, Vice President at Price Futures Group, commented that the market's downward trajectory is occurring "in a rather dramatic way" due to decreasing liquidity. However, he also suggested that the current prices could largely be a "correction", and that bulls might still drive the prices close to record highs.

The Hightower Report for this week indicated that "commercial firms are postponing some of their West African cocoa purchases until the next season, which has put pressure on the cocoa market."

Need for a New Spark

Judy Ganes, President at J. Ganes Consulting, stated that bulls require a "new spark" in the form of adverse weather reports in West Africa to stabilize prices. She said, "Bull markets need constant feeding to be sustained," and that the prolonged price surge has created a "vacuum" due to a shortage of new buyers.

Market Turmoil and Future Predictions

Despite the market upheaval this week, Oil trader Pierre Andurand maintains a $20,000 price target for later this year.

What are your thoughts on this unprecedented drop in cocoa prices? Do you think the market will recover soon, or is this a sign of more instability to come? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, delivered to your inbox every day at 6pm.