Cocoa Prices Dip as Weather and Production Challenges Impact Harvests
Market Trends Shift Following Dollar Index Rally
December ICE NY cocoa (CCZ24) closed down -124 (-1.60%) on Monday, while December ICE London cocoa #7 (CAZ24) fell -1 (-0.02%).
Heavy Rain Impacts West African Harvests
Cocoa prices initially rose on Monday due to severe rainfall in West Africa, which caused flooding and kept cocoa farmers from their fields, delaying the harvest. The heavy rain also complicates the drying process for beans, negatively affecting their quality. However, gains were reversed as the dollar index (DXY00) surged to a 2-month high, leading to long liquidation in cocoa futures.
Declining Exports from Ivory Coast Raise Concerns
Data from the Ivorian government on Monday showed that farmers shipped 100,264 MT of cocoa from October 1 to October 13, a decrease of 12% from 114,000 MT during the same period last year. As the world’s largest cocoa producer, this drop in the Ivory Coast is likely to support cocoa prices.
Falling Cocoa Stockpiles Indicate Supply Tightness
In the U.S., ICE-monitored cocoa inventories have hit a 15-year low, falling to 1,998,398 bags after a 15-month downward trend. This shrinking supply is considered bullish for cocoa prices.
Regulatory Delays Affect Market Sentiment
Earlier this month, concerns escalated when NY cocoa prices reached a 4-3/4 month low after the European Commission postponed an anti-deforestation law set to go into effect on December 30. Originally intended to limit forest clearance in cocoa-exporting countries, the delay means certified cocoa stockpiles in Europe can still fulfill contracts, easing fears of decertification and supply shortages.
Ghana’s Harvest Forecasts Fall Short
In August, Ghana’s Cocoa Board (Cocobod) lowered its 2024/25 cocoa production estimate to 650,000 MT from an earlier forecast of 700,000 MT. Challenges like adverse weather and crop disease have also led to a significant decline in the 2023/24 cocoa harvest, which is now expected to be 425,000 MT—a 23-year low. Ghana, the second-largest cocoa producer globally, will begin its new harvest in October.
Increased Production in Cameroon and Nigeria Weigh on Prices
On a less optimistic note, Cameroon’s National Cocoa and Coffee Board reported a 1.2% year-over-year increase in the 2023/24 cocoa production to 266,725 MT. Additionally, Nigeria’s cocoa exports for August rose by 6.8% from the previous year to 14,984 MT, further straining the market.
Mixed Demand Trends Reflect Market Volatility
Despite favorable demand in Q2, consumption may have declined in Q3 due to high prices. The National Confectioners Association noted a 2.2% year-over-year increase in North America’s Q2 cocoa grindings to 104,781 MT, defying expectations for a slight drop. In Asia, cocoa grindings dipped only slightly, falling 1.4% to 210,958 MT, also better than expected. Meanwhile, European cocoa grindings unexpectedly increased by 4.1% to 357,502 MT.
Global Cocoa Deficits Highlight Market Imbalances
In a notable development, the International Cocoa Association (ICCO) revised its global cocoa deficit estimate for 2023/24 to -462,000 MT, marking the largest deficit in over 60 years. This figure reflects a decrease in the production estimate to 4.330 MMT from May’s 4.461 MMT, with projections indicating a critical cocoa stocks/grindings ratio at a 46-year low of 27.4%.
More Cocoa News from Barchart
On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
