Financial Associated Press, May 4 (Editor Ma Lan) the price of cocoa beans has risen sharply in recent months on the premise of poor harvest prospects. But cocoa prices plummeted again as liquidity dried up and buyers were no longer willing to buy.
Futures prices close to $12000 a tonne last month have fallen to nearly $7500 as traders become more expensive to maintain positions and the liquidity crunch subvertsRadicavideopokerWith the development of the market, the trend has become more unstable.
The cash crunch is now forcing traders to postpone purchases from top producers. Buying more physical cocoa requires traders to hedge more in the futures market, but soaring volatility forces them to invest more money to pay margin calls.
There are signs that commercial companies are postponing purchases of some West African cocoa until next season, putting pressure on the cocoa market, according to a report.
Liquidity scarcity
The global market faces a shortage of cocoa beans for the third year in a row due to poor harvests in West Africa, the main producing area, driving the price of the commodity to rise rapidly in recent months. It also raises the cost of chocolate, putting pressure on companies and traders to scramble to buy cocoa beans.
But the frenzy has entered a turning point. The total number of open positions in New York cocoa has fallen to its lowest level since 2011, according to data.
Steve Wateridge, head of research at Tropical, a research firm, said there was not enough liquidity in the market and that sparse trading had put downward pressure on cocoa prices. But the problem for traders now is that they cannot judge the harvest of cocoa crops next season.
However, there are also signs that the supply situation may improve. Rainfall in West Africa may contribute to the upcoming medium-term harvest. In addition, C ô te d'Ivoire and Ghana have increased the prices paid to farmers to attract more beans to return to the market.
Tristan Fletcher, chief executive of ChAI, a platform that uses artificial intelligence to analyze commodity markets, said coffee and cocoa beans were severely overbought and the market was taking profits.