Commodity Roundup: Cocoa retreats from recent highs on profit-taking; precious metals fall

Cocoa futures (CC1:COM) plunged more than 13% on Tuesday to $8,327.59 per tonne, extending losses to a second session, as traders navigate a volatile market.

The most-active contract fell as much as 17% to $8,800 a ton in New York, the biggest intraday drop in data going back to 1960, Bloomberg reported. Futures settled at $8,931 per ton, the lowest in over a month. Overall, futures have dropped more than 20% from a record high reached April 19 after more than doubling this year.

Chocolate makers Hershey (HSY) and Mondelez International (MDLZ) are scheduled to report their first-quarter earnings this week, and investors would scan for comments on elevated costs and the demand situation.

As per reports, recent volatility in cocoa prices has made it more expensive for traders to maintain positions in futures, as margins have sharply increased, prompting traders to close out trades, which drains liquidity, making the market prone to large price swings.

Meanwhile, investor short covering across the agricultural markets namely the soybean complex, and profit taking across soft commodities, led by cocoa, prompted contract based outflows for the first time in eight weeks, totalling to -$8.3 billion last week, JPM Commodities Research said in a note.

The global agricultural market estimated open interest value also declined by 3.6% over the week to a seven-week low of $305.3 billion, the brokerage said, while the estimated value of open interest across global commodity markets continued to edge off recent highs at $1.41 trillion.

Elsewhere, precious metals pulled back as traders braced for the Federal Reserve’s policy decision, due on Wednesday, when the U.S. central bank is widely expected to keep rates unchanged following a hotter than anticipated U.S. inflation print.

Recent Commodity Price Movements and A look At Some ETFs