Key Takeaways
- Cocoa prices dropped significantly on Thursday.
- Europe's second-quarter grind declined by 4.6% year-on-year to its lowest level since 2020.
- Weak physical demand and concerns over market volatility affected the prices.
Cocoa futures experienced a sharp decline, losing 5% to £4,145 per metric ton by Thursday morning. This downturn followed a previous week's 20% rise in prices, indicating significant market volatility.
The primary factor driving this fall was the weak demand in Europe, where the second-quarter grind dropped by 316,366 metric tons, marking a 4.6% year-on-year decline and the lowest total since 2020. This data comes from the Business Recorder, highlighting ongoing concerns about market stability.
In contrast, Asia's second-quarter grind showed stronger-than-expected growth with a 25.07% increase compared to the same period last year. However, this positive trend did not offset Europe’s decline, leading to overall market uncertainty.
The July contract for cocoa is set to expire on Thursday, with an open interest of 3,781 lots, equivalent to 37,810 tons of cocoa. This figure was reported by dealers and underscores the importance of this contract in determining future price trends.
Other commodities also experienced downward pressure. Raw sugar prices fell 2.6% to 14.47 cents per lb, reaching a two-week low at 14.45 cents. Dealers attributed this decline to weak physical demand and concerns about the upcoming expiry of the August white sugar contract, which had already shown bearish performance.
White sugar prices followed suit, dropping by 2.3% to $438.90 a ton. This was influenced by good progress in Brazil's cane harvest during recent weeks, suggesting potential oversupply and further pressure on prices.
Arabica coffee also saw a decline of 2.25%, settling at $3.1940 per lb. Market analysts noted that while the harvest in Brazil had been gathering pace, it was lagging behind last year’s progress, adding to the overall bearish sentiment in the market.
