Cocoa futures (CAN24) have been rocketing upwards in the last months as a result of an unprecedented supply shortage concentrated in West Africa. After reaching a decades-record high, in just two days the contract 
dropped by over 31% this week. Liquidity factors, fueled by fear of trading in a "bubble" area, are driving volatility to record levels.

Options implied volatility above 80% make it extremely expensive with spreads record wide, or even not quoting.

Under these conditions, trading this contract has become impossible for any trader following any sound risk hedging approach. So, only speculative bets and algorithmic trades in the last weeks seem to be the bulk of players. The ICE reported that it is increasing the margins on cocoa contracts, a decision that will not improve liquidity.

The fundamentals have not changed much, so we still need to wait some months to get an idea of production for the next season.

Although the demand has been very inelastic to the cocoa price rally, that seems to be changing for the next months: the London cocoa futures forward curve is quoting 4,480 for December 2024, and 4,648 for July. That is a steep decline for the current spot at around 6,700.

Prices are now below the 10-, 20-, and 50-unit exponential moving averages (EMAs) plus the contango forward curve might indicate that the top for the cocoa rally is a done deal for 2024. 

Positive Performers This Week in Europe

UK Natural Gas (NFM24) +2.17%

Last week I reported healthy storage levels in Europe at 60%, and the increase of LNG imports into Europe from the US.

We continue to see unexpected gas outages from Norway scheduled for this summer, with the fact that Russian supplies are being cut further and increased demand from China as supportive.

Since the destruction of the Nordstream pipeline, there is strong competition for LNG gas between Europe and Asia that have supported prices.

The chart shows a consolidation area between 68 and 76 with all the moving averages slightly pointing upwards.

By historical levels, quotes look "value". Having said that, watch out for any improvement coming from Norway to determine the trend.

Rapeseed (XRQ24) +1.52%

European Rapeseed is showing momentum since February 2024, with prices crossing over the 50 weekly EMA on March 11. The 10 and 20 and EMAs are firmly above the 50 EMA, confirming the current trend. The 20 EMA has been a reliable point to enter long trades since Feb. 26, 2022. 

The close resistance is at 480 from here, where a pullback and profit taking is very likely.

There's not much fundamental news on Rapeseed this week, and the contract is following the direction of corn and wheat. 

Given the price action in 2023, 500 as a target remains realistic for 2024.

White Sugar#5 (SWQ24) +1.22%

Sugar contracts have started a deep bearish move on April 8. The main reason is the increasing Brazil (largest global producer) production; the marketing year 2023-2024 yielded a record 705 million metric tons. Exceptional weather in Brazil and yield improvement were the main factors.

Meanwhile, in India, sugar production output keeps surprising to the upside also, with weather conditions that contradict the previously dire "El Nino" forecasts.

The chart is stabilizing after a deep downtrend that started on April 2. The odds now look in favor of the bulls if we stop seeing lower lows.
Although current market price at 570.5 is below the 10, 20 and 50 EMAs, the current attempt to break out and cross the 10 EMA should be very bullish. Failing that, we will see further downside, with the 10 EMA acting as resistance.

Negative Performers This Week in Europe

Robusta Coffee 10-T (RMK24) -14.5%

After many weeks of explosive uptrend initiated in November 2023, when it was trading at 2500, it peaked at 4500 last week. This week, we see a sharp decline triggered by bigger-than-expected ICE inventories. A lot of profit taking last days, but fundamentals still support the bull case.

The massive selloff this week of cocoa markets had spillover effects on the rest of the soft commodities sectors, particularly coffee futures.

Robusta hit an all-time high last week, but it is sharply retreating this week, mainly due to technical fund liquidations.  

Tin Refined 3M (Cash) (Q2Y00) -5.79%

After topping at 36,050 on 22 April, tin contracts are now in a correction. It has crashed below the 10 and 20 EMAs, and will likely find support at the 50 EMA.

Last week, I wrote about the shortages in Myanmar, Indonesia and Congo in this industrial metal, and how the declining stocks in the LME were driving the rally. Inventories have declined by 45% to 4245 tons this year.

The tin forward curve is in contango, meaning the market expects prices to trade at a much lower range in the coming months. There are reports of a concentrated large position in one party (40% of total open interest) that may be liquidating in the last days.

Tread with care in this thin, illiquid market, as it has turned to the downside this week. The fundamental picture remains bullish for now.

Crude Oil Brent (CBN24) -4.7%

The Israel-Iran tensions seemed to be in a pause this week, plus robust U.S. crude inventories are also bearish for the Brent contract - particularly the last reported 7.3 million barrel increase in U.S. stockpiles last week, and a 3-year-record U.S. production keeps the direction down. 

Brent since September 2023 is trading in a range: it cannot break the 96 mark and has a reliable support in the 70-71 area.

Watch out when approaching these levels, as technical trading seems to be driving the action in the last months.