Cocoa Prices Surge Amid Weather Challenges and Supply Dynamics
Cocoa Market Shows Signs of Growth Despite Adverse Weather Conditions
December ICE NY cocoa (CCZ24) on Thursday closed up +109 (+1.31%), while December ICE London cocoa #7 (CAZ24) rose +137 (+1.90%). Cocoa prices edged higher, with London cocoa reaching a four-month high. Heavy rains in the Ivory Coast are significantly impacting cocoa production, contributing to increased mortality rates among cocoa buds on trees.
Currency Fluctuations and Global Trends Affect Cocoa Pricing
The rise in London cocoa prices was accelerated by a notable drop in the British pound (^GBPUSD), which fell to a six-month low. A weak pound typically boosts the price of cocoa when measured in sterling. Recent severe weather in West Africa has further supported cocoa prices. Last Friday, NY cocoa hit a two-and-a-half-month high, and London cocoa reached its four-month peak on Thursday as flooding from the rains affected fields and increased the risk of disease, ultimately influencing crop quality.
Concerns About Crop Quality Amidst Record Low Cocoa Inventories
Currently, harvested cocoa beans from the Ivory Coast show lower quality, with around 105 beans per 100 grams. The Ivory Coast cocoa regulator allows for bean counts between 80 to 100 for quality cocoa, making this current level concerning. Additionally, global cocoa stocks are dwindling, with ICE-monitored inventories in U.S. ports falling for 17 consecutive months to a 19-year low of 1,601,590 bags.
Mixed Global Demand and Production Estimates Influence Market Sentiment
Despite the concerning conditions, production numbers from the Ivory Coast present a bearish outlook; data from Monday indicated that shipments from October 1 to November 17 totaled 548,494 MT, marking a 32% increase from 415,523 MT during the same period last year. However, this increase was overshadowed by a production estimate revision by the Ivory Coast regulator on October 18, which raised the 2024/25 production forecast to 2.1-2.2 MMT from 2.0 MMT projected earlier.
Regional Insights Show Varied Cocoa Grinding Performance
Recent reports on cocoa demand showed mixed results. The National Confectioners Association noted that North American cocoa grindings jumped 12% year-over-year in Q3 to 109,264 MT. Meanwhile, the Cocoa Association of Asia reported a modest increase of 2.6% year-over-year to 216,998 MT. In contrast, the European Cocoa Association recorded a decline of 3.3% year-over-year to 354,335 MT in their Q3 data.
Production Cuts in Ghana and Cameroon Affect Global Cocoa Supply
Ghana’s Cocoa Board (Cocobod) cut its production estimate for 2024/25 to 650,000 MT, down from an earlier 700,000 MT, due to weather challenges and crop diseases. This aligns with Ghana’s harvest, which fell to a 23-year low of 425,000 MT. Conversely, Cameroon, the fifth-largest cocoa producer, reported a 1.2% year-over-year increase in production for the 2023/24 season to 266,725 MT, while Nigeria saw a 6.8% rise in exports to 14,984 MT.
Global Supply Concerns Highlighted by ICCO’s Deficit Projections
The International Cocoa Association (ICCO) raised its global cocoa deficit estimate for 2023/24 to -462,000 MT, up from -439,000 MT previously. This projected deficit represents the largest shortfall in over 60 years. In addition, the ICCO reduced its cocoa production forecast to 4.330 MMT from 4.461 MMT while indicating that the global stocks-to-grindings ratio is expected to hit a 46-year low of 27.4%.
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 are 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.
