Cocoa volatility amid cautious market

The cocoa market has reinforced its volatile behavior in recent days. On August 11, the December contract reached USD 8,823/t in New York and GBP 7,949/t in London during the session, a level not seen since May, and that brought the RSI close to the overbought zone.

This advance was driven by fund buying, breaking the technical resistance levels. In addition, the scenario was supported by concerns about the weather in West Africa, the reduction in stocks monitored by ICE, and uncertainties regarding the impact of US tariffs on the cocoa market.

However, after the rally, the contract underwent a correction and ended the week of August 22 quoted at USD 7,781/t in New York and GBP 5,320/t in London, accumulating weekly declines of 6.0% and 4.2%, respectively. The movement also reflected factors such as signs of improvement in weather conditions in West Africa and the possibility of an agreement between the US and Ecuador.

Despite concerns about the impact of weather on the development of the main season in African countries, isolated rains in some regions of Ivory Coast brought some relief for the start of the next main crop in October. The European climate model indicates different conditions for cocoa-producing regions in West Africa, with the possibility of above-average rainfall in important regions such as Bas-Sassandra, the main producing district in Ivory Coast. However, it is worth noting that in addition to rainfall, which is important for the current secondary flowering phase, sunshine also contributes to fruit development, reinforcing the need for a balanced climate scenario in the coming weeks.

In the United States, ICE certified stocks increased during the week, driven by higher deliveries from countries such as Colombia, Peru, and Ecuador, the latter in line with the progress of the local harvest, which intensifies from August onwards. Even so, volumes remain slightly below those recorded in the same period last year (the same situation in Europe). The latter might help bring a more comfortable outlook once the certification process is completed, even if stocks remain below their historical average.

Regarding Ecuador, the country gained prominence in an area that the market is closely monitoring: the possibility of a tariff agreement with the United States. Currently, Ecuadorian cocoa exports to the US market are subject to a 15% tariff, but there are rumors of ongoing negotiations to exempt the product. This reinforces the growth trend in US purchases of Ecuadorian cocoa, which are already exceeding last year's volumes.

In this context, cocoa prices may face a more bearish bias in the short term. Still, high volatility keeps the market sensitive to any news. In New York, speculators reduced their long positions in the week to August 19, keeping the net balance close to neutral and still below historical levels, which reinforces the perception of caution in the market. In London, net long positions increased, but remain at modest levels.

The cocoa market has remained highly volatile in recent weeks, with the December contract reaching highs during the August 11 session before ending the week of the 22nd down in New York and London. The initial rally reflected fund buying and a break in technical resistance, reinforced by climate concerns in West Africa, falling ICE stocks, and tariff uncertainties in the US. The correction, on the other hand, reflected signs of improved weather in the African producing region and rumors of a tariff agreement between the United States and Ecuador.

In the US, ICE certified stocks increased with deliveries from Colombia, Peru, and Ecuador, although they are still slightly below the same period last year, amid a high volume of bags awaiting classification. Ecuador, in turn, gained prominence with the possibility of tariff exemption for cocoa in the US, reinforcing the country's export growth trend.

In this scenario, cocoa prices are biased lower in the short term, although high volatility keeps the market sensitive to new factors. In New York, speculators reduced their long positions, keeping the net balance close to neutral and still below historical levels, which reinforces the perception of caution in the market.