Cocoa price prediction following bullish grindings data

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Jan 19, 2022
  • cocoa price has bounced back after pulling back from its three-month high.
  • Cocoa grindings data from Europe and Asia signal surging demand.
  • Economic recovery from the coronavirus pandemic is set to boost demand for chocolate.

Cocoa price is back on its rally after pulling back from its three-month high earlier in the week. Bullish cocoa grindings data is the rally’s key driver.

Cocoa grindings

Cocoa price has extended its previous gains as a reaction to the bullish cocoa grindings data. On Wednesday, the German confectionery industry association – BDSI – indicated that cocoa grinds rose by 8.8% to 101,149 tonnes in Q4’21. On a broader scale, it surged by 8.1% over the course of 2021 to 393,311 tonnes.

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Data released on Wednesday from the broader European continent indicated that grinds in 2021’s last quarter rose by 6.3% YoY to 365.826 tonnes. Lindt & Spruengli, a Swiss chocolate company predicts that chocolate sales will surge by between 5 and 7% in the current year. Supply chain challenges were a key bearish factor in the past year.

Asia also recorded a 6.3% increase of bean processing in Q4’21 YoY. Investors now await North America cocoa grindings reading on Thursday. Analysts expect a rise of 4.6%. The grinds data are usually a measure of demand. In 2020, the amount of cocoa beans processed into confectionery dropped as the coronavirus pandemic and subsequent lockdowns hurt demand. As economies continue to recover, the soft commodity is expected to benefit from heightened demand.

Cocoa price prediction

Cocoa price has been rallying for two weeks now. Since hitting its one-month low of 2,408 per tonne earlier in the month, it has risen by close to 10%. Late last week, the New York cocoa futures rose to its highest level since October 2021. While it has since pulled back from the three-month high, it has held steady above the crucial resistance-turn-support zone of 2,600.

Cocoa price was trading at 2,657 as at 1717 GMT on Wednesday. On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages. The technical indicators signal further gains in the short term. Indeed, I expect the bullish outlook to hold in the ensuing sessions.

2,600, which is along the 25-day EMA, will likely remain a steady support zone. On the upside, the soft commodity will probably continue  to find resistance at the month’s high at 2,683 in the near term. Additional bullish momentum may push the price to October’s high of 2,709. However, this thesis will be invalidated by a decline past the support level at 2,600.

cocoa price
cocoa price
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