Technical Analysis Post

Cocoa Hits All-Time High at $10,157.3: Ghana's Currency Weakens as Cocoa Achieves Historic High

| 28 March, 2024 at 11:57 GMT

On March 26, 2024, two significant events unfolded in Ghana, shaping both its currency and its key export market. Firstly, the Ghanaian Cedis experienced a notable weakening against the USD, reaching a rate of 13.1005, marking its highest depreciation in 2024. Simultaneously, cocoa, Ghana’s prized export commodity, achieved its all-time high price on the global market, hitting $10,157.3 per tonne.

As the world’s second-largest cocoa-producing country, Ghana’s economy heavily relies on this commodity. However, the government-controlled institution, COCOBOD, fixes the buying price for cocoa, purchasing it from local farmers at Ghs 1,308.99 per bag ($100.08). With 16 bags making up one tonne, this translates to Ghs 20,943.84 ($1601.21) per tonne. 

The intertwined effects of the Cedis depreciation and the relatively low buying price of cocoa from farmers compared to the global market price significantly impact Ghana’s economy.

Cocoa has surged by $5,426 per metric ton or 129.31% since the beginning of 2024, as reported by a contract for difference (CFD) tracking the benchmark market for this commodity. March 2024 saw Cocoa reaching an all-time high of $10,157.30.

Cocoa futures hit a new record of $9,900 per ton, marking a 54% increase for March and over 130% surge year-to-date. Poor harvests in leading producers Ivory Coast and Ghana have caused supply shortages. December’s heavy rains from El Niño damaged crops and spread black pod disease. Subsequent extreme heat, aging trees, and illegal mining further diminished production.

Ghana revised its cocoa production forecast down to 650,000 tons from 850,000 for the current year. Reports revealed that some cocoa plants in Ivory Coast and Ghana halted or reduced processing due to financial constraints. The Ivory Coast cocoa regulator anticipates a 33% decrease in the mid-crop, starting in April, to 400,000 MT from 600,000 MT last year.

From a technical analysis perspective using the 4HR Chart of Cocoa Cash Contract on TradingView, it is evident that the price of cocoa has been in an upward trend, starting from $6334.5 and currently hovering around $9672.6. A trendline originating from $6334.5 acted as resistance at $7728.7 after a retracement from $8571.0. Following the rejection at the uptrend line, the price continued its upward movement, reaching $10159.5, which serves as the current resistance, before pulling back to around $9672.6.

If the uptrend line is breached, it indicates a higher likelihood of further downward movement. Conversely, if the uptrend line continues to reject the price, there is a higher probability of the price rising towards the resistance level. Breaking the resistance level would suggest an increased likelihood of further upward movement in cocoa prices.

Sources : 

https://www.tradingview.com/x/2ZZqqUUy/

https://cocobod.gh/#

https://www.tradingview.com/x/07jZ6O4Z/

https://en.m.wikipedia.org/wiki/Ghana_Cocoa_Board

https://www.cocoalife.org/in-the-cocoa-origins/cocoa-life-in-ghana/#:~:text=Ghana%20is%20the%20world’s%20second,as%20the%20Cadbury%20Cocoa%20Partnership.

https://www.investing.com/analysis/cocoa-futures-the-impact-of-supply-woes-on-the-broader-market-200647129

https://www.icco.org/

https://thecocoapost.com/icco-forecasts-547000mt-deficit-in-2023-24-cocoa-output/

https://www.icco.org/statistics/

https://www.cnbc.com/amp/2024/03/26/cocoa-prices-hit-10000-per-metric-ton-for-the-first-time-ever.html

https://www.tradingview.com/x/cJ2uUuO8/