Cocoa Futures: Are You Buying Chocolate For Valentine's Day?

February 12, 2021 01:00 PM
With fewer people going out due to Covid-19 restrictions, along with the slow reopening of restaurants and stores, chocolate sales are down
Cocoa is certainly a commodity to watch this year, as it’s been heavily affected by lockdowns
With weather patterns also creating a bullish sentiment, cocoa prices should head back above 2500 in the near-term
Man picking cocoa fruit

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Cocoa futures continue to be demand-driven. This time of year, we typically see a boost in chocolate sales for the Valentine’s Day holiday, but this year is a little different. With fewer people going out due to Covid-19 restrictions, along with the slow reopening of restaurants and stores, chocolate sales are down. The May chart continues to trade in consolidation due to these factors.

At a point on Thursday, we saw a 9% drop-down. I do believe a lot of it has to do with traders preparing for the roll. Cocoa is certainly a commodity to watch this year, as it’s been heavily affected by lockdowns. Loosening restrictions and more activities beginning to reopen will only help prices move higher. If the trend continues, traders will want to be long moving forward, so shorts will probably look to exit positions as the year progresses. 

We saw a dramatic sell-off due to repositioning from the March contract to months that are in the more distant future. Looking at options pricing, it appears traders are looking to remain long in cocoa contracts.

With weather patterns also creating a bullish sentiment, cocoa prices should head back above 2500 in the near-term.

May Daily Chart


Source: Tradingview

If you're interested in discussing the soft commodities, contact pmooses@rjofutures.com

About the Author

Peter Mooses is a commodity broker at RJO Futures. He enjoys the analytical aspects of futures trading and appreciates the economic impact that commodities have across all markets. Peter utilizes market analysis and trends to help clients achieve a balance between risk and return, while always keeping their investment objectives top of mind. Follow Peter on Twitter @PMoosesRJO