Analysts Warn of Cocoa Market Peak as Prices Flounder



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US cocoa futures relinquished nearly all of their gains from earlier Wednesday as hedge funds exited bullish bets following a rally that had propelled prices surging by as much as 20% over the past two days.

In another instance underscoring the intense volatility in this year’s hottest commodity market, cocoa contracts for July delivery experienced fluctuations between gains of up to 5.4% and losses of up to 2% in New York on Wednesday.

Jack Scoville, vice president of Price Futures Group, noted, “The market has topped out, and speculators are using rallies to get out.” While cocoa has attracted renewed buying interest near $7,000 per metric ton, prompting the recent rally, Scoville anticipates prices gradually receding to levels closer to $5,000 per ton.

Cocoa prices have soared to unprecedented highs this year due to a global shortage of beans. However, major chocolate companies like Toblerone and Oreo maker Mondelez International Inc. argue that current levels are inflated and do not reflect the actual physical situation. Recent rainfall in West Africa has alleviated concerns about the mid-crop on the supply side, although farmers remain apprehensive about previous heat damage, according to the Hightower Report. Additionally, cocoa stockpiles held at US ports have dwindled to a three-year low.

Meanwhile, sugar prices dipped as much as 2.2% in New York, attributed to a stronger dollar prompting producer selling from Brazil, as per Scoville.

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