Morning Futures Roundup

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Cocoa Prices Weak Despite Crop Concerns

   Fundamentals
Cocoa bears seem to have firm control of the market lately, as concerns about the mid-crop harvest have, so far, failed to spur buying interest. This weekend, the International Cocoa Organization lowered its forecast for this season's harvest from the Ivory Coast and Ghana, the world's first and second largest Cocoa producers respectively, dropping the production totals by a combined 250,000 tons, due to abnormally dry conditions during the past few months. This news sparked a moderate rally early in the trading session on Monday. However, aggressive selling emerged once the July futures approached the 2300 per ton level, which sent prices lower to end the trading day.

Continued concerns that the economic slowdown in both Europe and in Asia may slow demand for Cocoa this coming year seems to weigh on speculators minds, with the most recent Commitment of Traders report showing large non-commercial traders (large speculators) holding a net-short position of 3,752 contracts as of March 27th. This data was prior to the nearly $200 per ton price decline seen during the past few sessions, and large speculators may be increasing their short position as prices continue to move in their favor.

   Technical Notes
Looking at the daily chart for July Cocoa, we notice prices failing below 2200, which set-off a slew of sell stops once this psychological support level was breached. Prices are now well below both the 20 and 200-day moving averages, and momentum as measured by the 14-day RSI has tuned weak, with a current reading of 36.0. The next support point is not found until the January 6th lows of 2048. Resistance is found at the 20-day moving average, currently near the 2323 level.

  
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