A short-covering rally and fund participation took cocoa prices up over $300, up over 13 percent, over the past 30 days after reaching low prices in the middle of July. After trying to go net short in the first half of July, speculators reversed course, covered shorts, and added to long positions, advancing prices as weekly arrival figures slowed. Funds have likely entered new long contracts of around 15,000 lots as of the middle of August.
Many commercial end users took advantage of the previous dip to extend coverage out through the end of this calendar year and into the first half of 2022. As a result, they are relatively well positioned and not as vulnerable to current price appreciation. In fact, the market now appears to be overextended to the top side based on technicals, and this suggests that the market is vulnerable to some profit-taking that could send prices lower in the coming weeks.