Cocoa Prices Dip Amid Supply Dynamics and Regulatory Uncertainty
Mixed Signals: Factors Impacting Cocoa Prices
Today, December ICE NY cocoa (CCZ24) is down -283 (-3.29%), while December ICE London cocoa #7 (CAZ24) sees a decrease of -136 (-1.91%).
Moderate declines in cocoa prices are being observed today. Long liquidation pressures are affecting the market, as concerns regarding EU deforestation regulations have diminished. This follows the Intercontinental Exchange’s announcement to postpone planned changes to its coffee and cocoa contracts until the end of 2025, largely due to uncertainty surrounding the European Union’s deforestation policies. Last Friday, cocoa prices had reached a two-month high in New York and a four-month peak in London, primarily due to supply worries triggered by the European Parliament’s vote to amend deforestation regulations, which could limit cocoa supplies from deforestation-impacted countries.
Ivory Coast and Global Supply Factors
Another key factor contributing to lower cocoa prices is the increased production in the Ivory Coast, the world’s largest cocoa producer. Recent government data revealed that farmers shipped 548,494 MT of cocoa to ports between October 1 and November 17, marking a 32% rise from 415,523 MT during the same period last year. Further impacting prices, the Ivory Coast regulator, Le Conseil Cafe-Cacao, raised its production forecast for the 2024/25 season to between 2.1 and 2.2 MMT, up from an earlier estimate of 2.0 MMT.
Weather Conditions Affecting Crop Quality
Adverse weather conditions in West Africa have also provided recent support for cocoa prices. Forecaster Maxar Technologies noted that certain regions in Ghana and Nigeria are undergoing dry and hot conditions, which could adversely affect the upcoming mid-crop beginning in April. Conversely, heavy rainfall in the Ivory Coast has resulted in flooded fields, heightening the risk of crop diseases and negatively influencing quality. The most recently harvested cocoa beans from the Ivory Coast indicate lower quality levels, with approximately 105 beans per 100 grams, which is above the acceptable count set by the regulator.
Shifting Cocoa Stocks and Demand Trends
On a positive note, decreasing global cocoa stockpiles are supporting prices. ICE data indicates that cocoa inventories monitored in U.S. ports have been declining consistently for 17 months, recently hitting a 19-year low of 1,656,818 bags.
Global demand for cocoa presents mixed signals. The National Confectioners Association reported on October 17 that North America experienced a 12% year-over-year increase in cocoa grinding for the third quarter, amounting to 109,264 MT. Meanwhile, the Cocoa Association of Asia noted a 2.6% year-over-year rise in Asian cocoa grinding, totaling 216,998 MT. However, the European Cocoa Association reported a decline in European cocoa grindings, which fell 3.3% year-over-year to 354,335 MT.
Challenges for Major Producers
Support for cocoa prices was also bolstered after Ghana’s Cocoa Board (Cocobod) lowered its cocoa production estimate for 2024/25 to 650,000 MT, down from a previous forecast of 700,000 MT. This adjustment reflects the impact of poor weather and crop diseases, resulting in Ghana’s cocoa harvest for 2023/24 plummeting to a 23-year low of 425,000 MT. As the second-largest cocoa producer in the world, Ghana’s new harvest season began in October.
Meanwhile, an increase in production from Cameroon, the fifth-largest cocoa producer, is seen as a bearish factor for prices. Cameroon’s National Cocoa and Coffee Board announced that cocoa production rose by 1.2% year-over-year to 266,725 MT in the 2023/24 season. Additionally, cocoa exports from Nigeria increased by 6.8% year-over-year to 14,984 MT.
Global Cocoa Deficit and Future Projections
In a significant development, the International Cocoa Association (ICCO) raised its 2023/24 global cocoa deficit forecast to 462,000 MT—up from May’s estimate of 439,000 MT. This marks the greatest deficit seen in over 60 years. Furthermore, ICCO has reduced its cocoa production forecast to 4.33 MMT from May’s 4.461 MMT, projecting a global cocoa stocks-to-grindings ratio at a historic low of 27.4% for the 2023/24 period.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
