Cocoa futures plunged over 4% on the news that Côte d’Ivoire may cancel, and then remarket 200,000-250,000 tonnes of exports – threatening a round of fresh selling pressure.
Early on Friday, the news hit the market that exporters will have six days to furnish documentation for export contracts, including proof of a counterparty, or their exports will be resold by the state marketing board.
If all contracts are cancelled, that would equal nearly 15% of total Ivorian production last year.
Unhedged exports
According to Reuters, domestic exporters purchased contracts for the 2016-17 season without securing a price with off-takers.
Since the fall in global prices, the exporter now faces heavy losses.
The cancellation of these contracts means that physical supplies which were previously thought sold now have to be remarketed to international buyers.
‘The icing on the cake’
Cocoa prices have already been under pressure in recent weeks, thanks to rains in West Africa, where most of the world’s cocoa is grown.
The wet weather bodes well for next season’s crop.
A US trader told Agrimoney that the latest bearish news was “the icing on the cake,” as speculators liquidate long position, pushing prices below technical support levels.
“This doesn’t change what the crop is going to be,” he said. “But this has to be deflating whatever bulls are left in the market… with news like this, it’s hard to stay long.”
“It’s not a good day for the cocoa bulls,” he concluded.
Prices find 7-month lows
December cocoa futures, the most widely traded contract, were down 4.4% in midday trade in New York, at $2,757 a tonne.
This is the lowest level for the second-month contract since early February.
In London, December cocoa futures were down 3.5%, at £2,185 a tonne, with a slightly weaker tone to the sterling supporting prices a touch there.
Source: agrimoney
