Cocoa prices bounce back following 20% drop amidst historic low liquidity | Global News

World cocoa prices experienced a rollercoaster ride this week, with July London cocoa futures on the ICE exchange plummeting nearly 15% on Monday, marking their largest one-day loss. The downward trend continued on Tuesday, with prices dropping more than 10% at the market open.

The sharp decline in cocoa prices was attributed to technical triggers and record low liquidity in the market. Hedge funds, which had been active players in the market earlier in the year, had largely exited, leaving the market in the hands of algorithmic funds programmed to follow technical signals.

The surge in cocoa prices earlier in the year was driven by adverse weather conditions and disease in top producers Ivory Coast and Ghana. However, the recent slump has left many physical market players at a loss and raised concerns about the future of cocoa prices.

Jonathan Parkman, head of agricultural sales at Marex, commented on the lack of concrete news driving the market volatility, stating, “The lack of liquidity is going to move the market disproportionately in both directions.”

Despite the recent losses, cocoa prices saw a slight recovery on Tuesday, with July London cocoa futures up 2% at 7,834 pounds a ton. The market is closely monitoring crop developments in Ivory Coast and Ghana, which will provide insight into future supply and demand dynamics.

In addition to cocoa, other soft commodities also experienced price fluctuations, with coffee and sugar prices seeing declines as well. The market remains uncertain as investors await further developments in the cocoa industry.