COCOA (#COCOA )

COCOA (#COCOA) Weekly Special Report based on 1 Lot Calculation:

SUPPLY SIDE:

• TOP PRODUCERS: The biggest producers are Ivory Coast (40% of world total), Ghana (20% of world total), Nigeria, and other small countries in Africa (10% of world total). All in all, West Africa produces around 70% of the world’s total. So, any problems that hit West Africa impact production on a massive scale.
• CHRONIC AGRICULTURAL PROBLEMS IN WEST AFRICA: Various problems, such as El Nino warm weather (compounded by climate change), Black pod fungal disease, and the swollen shoot virus could cause supply disruptions and price spikes of cocoa. This problem was made even worse by the fact that farmers in these producer countries are relatively poor and don’t have access to modern agricultural methods to protect their crops.
• LOW SUPPLY GROWTH RATE: The international cocoa organization is projecting a growth of around only 1% in the following decade, given the problem facing cocoa producers.

DEMAND SIDE:

• TOP CONSUMERS: The biggest consumers of cocoa are developed countries (around 70% of the total demand for cocoa), but we could expect that the demand for cocoa will increase, especially from emerging and developing countries like China and India. (China and India have cocoa consumption growth rates of around 20% and 10% respectively, which means that the market could double on average every 3,6 and 7,2 years).
• HIGHER DEMAND GROWTH RATE: The average growth rate for world cocoa demand could be projected at 4.7%.

RECENT DEVELOPMENTS:

• BREAKING: INTERNATIONAL COCOA ASSOCIATION (ICCO) RAISED ITS DEFICIT ESTIMATE (2023/2024 season) TO 478,000 metric tons from the previous 462,000 metric tons. This would be the largest deficit in 60 years. This comes following the ICCO's latest quarterly report, published in November 2024. The ICCO also cut its 2023/2024 cocoa production estimate to 4.380 million metric tons from May’s 4.461 million metric tons, down 13.1% from the same period last year (Source: Barchart.com)
• NEXT QUARTERLY REPORT EXPECTED (Q4): EXPECTED BY THE END OF FEBRUARY 2025.
• JANUARY 24, 2025: LOW GLOBAL STOCKPILES OF COCOA. The market is seeing a noticeable fall in the global stockpiles of cocoa. Cocoa inventories monitored by ICE (International Continental Exchange) in US ports have been declining for the past 1,5 years, reaching a 21-year low of 1.263.493 bags.

PRICE ACTIONS:

• PAST ONE-YEAR PERFORMANCE: COCOA PRICES HAVE RISEN BY AROUND 46% OVER THE PAST 1 YEAR. HOWEVER THE PRICE COULD DECLINE.
• ALL- TIME HIGH (DECEMBER 18, 2024): 12,911. If the cocoa price tries to recover to its recent all-time high of 12,911, it can then offer an upside of around 41%, Although, prices can fall, too.
• ANALYST OPINION: JPMORGAN sees a deficit in the 2024/2025 season. The JPMorgan analyst said, "We maintain our view of structurally higher cocoa prices for longer, amid supply-side constraints and firm demand."

TECHNICAL ANALYSIS:

• STRONG SUPPORT AT $7000 SINCE EARLY MAY 2024: Nine times tested over the past 10 months, yet there remains a risk of a potential breakout below this level if market conditions change.

GRAPH (DAILY): APRIL 2024 - FEBRUARY 2025

Please note that past performance does not guarantee future results

COCOA (#COCOA) February 24, 2025
Current Price: 9,020

Example of calculation based on weekly trend direction for 1 Lot¹

1. 1.00 lot is equivalent of 10 units
2. Calculations for exchange rate used as of 13:00 (GMT) 24/02/2025

There is a possibility to use of Stop-Loss and Take-Profit.

• You may wish to consider closing your position in profit, even if it is lower than suggested one
• Trailing stop technique could protect the profit.