Cocoa price: key levels to watch as demand and supply converge
- Cocoa price is down by 1,06% at $2,344.
- Prices have remained above $2,300 since November 2020 as demand recovers.
- A bumper harvest is expected in Ghana and Ivory Coast, which has curbed the price gains.
Cocoa price is down by 1.06% at $2,344 amid heightened supply in Ivory Coast and Ghana. However, the rise in demand has helped maintain the prices above $2,300 since late last year.
The key factor that has helped maintain cocoa price above the crucial level of $2,300 is the easing of COVID-19 restrictions. Prior to the onset of the coronavirus pandemic in February 2020, the prices hit close to a two-year high of $2,937. However, as the pandemic lowered the demand of the soft commodity, it dropped to $2,086 in July.
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Notably, cocoa price has remained above $2,300 since early November 2020. The boost has come from the progress of the vaccination programs in different parts of the world. The subsequent easing of COVID restrictions and improved social mobility has increased the demand for chocolates and other related treats.
Despite the increased demand for the soft commodity, abundant supply has curbed cocoa price gains. Ivory Coast, which is the leading producer of cocoa worldwide, is currently in its rainy season that runs from March to November. The above-average rainfall will be beneficial to the current crop, which is in its last developmental stage.
Ghana, which is the second-leading producer of cocoa, is also set to record a huge crop in the current season. The harvest, which is only months away, is expected to be the largest in over a decade. Favorable weather conditions and government interventions have boosted output in the country.
Cocoa price technical outlook
Cocoa price is down by 1.06% at 2,344. Despite the decline, it remains above 2,300, which has been the case since mid-November 2020. Nonetheless, since mid-May, the soft commodity has had its price drop by about 8.25% from 2,552 to an intraday low of 2,332 in Friday’s session. On an hourly chart, it is trading between the lower and middle Bollinger bands.
I expect cocoa price to continue finding support along the lower Bollinger band at 2,330. On the upside, it is likely to find resistance along the middle Bollinger band at 2,363. If more buyers enter the market, a move past that level will be geared towards the next target at 2,400. On the flip side, a move below the current support level of 2,330 will have the bears push the price to 2,318.