Cocoa futures in New York and London tumbled nearly 17%775pubcomAs fewer and fewer companies are able to afford rising costs to support775pubcomTheir trading, the market is prone to large price fluctuations.
In New York, the most active gold contract fell as low as $8800 a tonne, extending last week's decline. This is the biggest one-day decline since 1960. The market is very volatile. Prices fall today and rise again tomorrow. Overall, futures prices are down about 25% from the record high set on April 19 and have more than doubled so far this year.
Intercontinental Exchange (Intercontinental Exchange Inc.) has repeatedly increased the amount of money the company needs to invest to support its position, causing traders to leave the market. The total amount of open contracts in New York is close to its lowest level in more than a decade, according to compiled data.
In London, futures prices fell last week as C ô te d'Ivoire took action to compensate shippers for losses caused by unexpected increases in prices paid to farmers to avoid a wave of defaults on cocoa exports.
Leonardo Rossetti, an analyst at StoneX, said the increase in trading margin requirements and the sharp reduction in the number of outstanding contracts "opened up more room to reverse the trend, and fewer participants made it easier to drive more volatility."
As rainfall in the West African growing region may bring some benefits to the upcoming medium-term harvest in the region, the supply of beans may be alleviated. While the problem is far from being solved when severe shortages have led to shortages in the market for the third year in a row, wet weather has exacerbated the lack of new bullish events as fund managers continue to cut net long positions.
"the shortage is not over yet," said Paulo Torres, a trade and agriculture consultant in London. "the elephant in the room is the fact that there is no cocoa in Ivory Coast and Ghana," he added.
Cocoa futures prices have more than doubled in the past year due to bad weather, ageing trees and crop diseases that have hit West Africa. West Africa accounts for more than half of the global cocoa supply. This made it difficult for buyers to secure supplies and forced Ivory Coast and Ghana to extend contracts of about 400000 tonnes of cocoa, exacerbating supply constraints.