Getting silly: Cocoa futures near 20-month highs in May
For NY ICE cocoa futures, total noncommercial positions hit a one-year high at the start of May and in the last week. Market watchers know that significant fundamental price drivers—such as selling by origin countries or pre-holiday buying by manufacturers—are scarce at this time of year. This dearth of fundamental news sets the stage for the “silly season” ahead, when seemingly unwarranted volatility becomes the rule.
This volatility has been ascribed by some to the presence—and power—of speculators. In the wake of market upheavals of the last 20 years, managed money found attractive opportunities in cocoa. Algorithmic traders have reportedly followed in the wake of this significant shift for soft commodities like cocoa, adding to some volatility measures and to overall activity for these markets.
NY ICE cocoa futures price history vs. average volatility, quarterly history
Source: CFTC, McKeany-Flavell
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