Bittersweet: Cocoa Prices Trade Way Below Key Moving Averages


Jan. 26 2016, Updated 1:06 a.m. ET

Cocoa price trends

March cocoa futures prices were trading near the crucial support level of $2,800 per metric ton on January 20, 2016. The speculative selling in soft agricultural commodities, led by cocoa, dragged prices down to a nine-month low. The contract volume rose 59.8%. Prices traded way below the key moving averages, and they could fall further on speculative selling.

The chart above suggests prices could oscillate in the range of $2,900–$2,800 per metric ton in the short run.

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Price drivers

Speculative selling from the financial markets led to a plunge in cocoa prices on January 20, 2016. The rumor that Ghana’s cocoa regulator, Cocobod, bought large quantities of cocoa from farmers could drive the weakly supplied market, pushing prices down. The rumor dragged prices down on January 20.

Stock review

The decrease in cocoa prices means favorable changes for food and beverage companies as their input costs fall. Dean Foods (DF) and Hershey (HSY) rose 0.27% and 0.38% on January 20, 2016. These stocks have risen 1.4% and 2.0% over the past two days. But Mondelez International (MDLZ) lost 67% of the previous day’s gain by falling 1.9% on January 20. Starbucks (SBUX) fell 2.7% and lost its gain from the day before. The iShares MSCI Brazil Index (EWZ) fell 2.4% on January 20. It’s fallen 6.6% over the past three days.


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