Cocoa tends to begin a seasonal decline in early to mid-March through the end of May (shaded in yellow below), instituting a short position in our seasonal best-trade category. Selling on or about March 13, right before St. Patrick’s Day and holding until on or about April 16, for an average holding period of 23 trading days, has been a winner in 33 of the past 44 years. Even in the face of the 2008 great commodity bull-run, this seasonal trade worked with a potential profit of $1,730 per contract. Since 1997, this trade has only posted three losses.
Cocoa has two main crop seasons. The main crop from the Ivory Coast and Ghana in Africa accounts for approximately 70% of the world production and runs from January through March. As inventories are placed on the market, this has a tendency to depress prices, especially when demand starts to fall for hot chocolate drinks and chocolate candy in the spring and summer time. Cocoa’s clear trend over the last year has been lower and nearly in a straight line since last August. Sizeable deficits in the 2015-16 harvest that drove prices higher are expected to be filled with sizable surpluses in the current 2016-17 season.