Commerzbank Research says that, as expected in the event of a ‘Brexit’ vote – a vote by the UK to leave the EU, which is what transpired – London cocoa prices rose sharply on 24 June, the day after the vote.
“Sterling’s massive depreciation catapulted the cocoa price in the most-active futures contract to a five-year high of £2,351 per tonne,” said Commerzbank. “Ultimately, cocoa closed 2.5 per cent up at £2,343 per tonne. By contrast, the cocoa price in New York shed 5 per cent – not because of new fundamental data but because of the strength of the US dollar.”
Commerzbank said the strong US dollar also dampened the price performance of other agricultural products. Arabica coffee ended a week down for the first time in four weeks after the price declined by 4 per cent on 24 June.
“Many short-term-oriented market participants are likely to have been surprised by last Thursday’s referendum result after having built up net long positions in cocoa and Arabica coffee in the previous reporting week,” said Commerzbank. Sterling’s depreciation also drove up prices for other products that trade in Sterling.