Inflation-related volatility continues to impact commodity pricing, and cocoa is seeing recent price weakness on fund liquidation. Since their mid-May highs, cocoa futures have fallen nearly $200 per MT or nearly a tenth on position liquidation ahead of the July contract expiration. With futures back to normal contango, speculative funds are looking to liquidate positions rather than pay the carry to roll these forward. Fund total position is running about half of the levels in recent months.
Given dry conditions this spring throughout West Africa and the increasing interest in commodities as a hedge for underlying inflation, support may enter the market at this technical level. Funds are likely holding 10 to 12 percent of total open longs, which is a modest level relative to historical positions.
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