Cocoa Prices Fluctuate Amid Holiday Trading and Weather Concerns

March ICE NY cocoa (CCH25) is up +84 (+0.72%), while March ICE London cocoa #7 (CAH25) has decreased by -238 (-2.54%).

Cocoa prices are experiencing volatility as they trade lightly during the holiday season, responding to recent market highs. Last Wednesday, New York cocoa hit an all-time nearest-futures high, while London cocoa reached an 8-month nearest-futures high. There has been long liquidation pressure in recent sessions, but prices showed signs of stabilization today.

Prices took a hit earlier in the week due to reports of strong cocoa shipments from farmers in the Ivory Coast, the world’s largest cocoa producer. From October 1 to December 15, farmers shipped 970,945 MT of cocoa, a significant 30% increase over the 744,967 MT they shipped during the same period last year.

The markets saw a strong rally in cocoa prices during November and December, prompted by deteriorating forecasts for the West African cocoa mid-crop. Maxar Technologies warned that dry conditions could hamper the early development of the April-harvested mid-year cocoa crop. The seasonal Harmattan winds are expected to exacerbate these challenges.

On a positive note, Ghana’s cocoa harvest forecast for 2024/25 was recently cut by 5% due to weather-related worries. This marks the second downward revision for the season.

Decreasing global cocoa stockpiles are also a bullish indicator for prices. ICE-monitored cocoa inventories in U.S. ports have been on a downward trend for the past 1.5 years, recently falling to a two-decade low of 1,386,781 bags last Thursday.

Moreover, the International Cocoa Association (ICCO) adjusted its 2023/24 global cocoa deficit estimate to -478,000 MT from May’s estimate of -462,000 MT, marking the largest deficit in over 60 years. The ICCO also lowered its cocoa production forecast for that year from 4.461 MMT to 4.380 MMT, reflecting a year-over-year decline of 13.1%. Additionally, a projected global cocoa stocks/grindings ratio of 27.0% represents a 46-year low.

In West Africa, heavy rainfall has caused high mortality rates in cocoa buds, leading to rapid price increases. Flooding in the Ivory Coast has raised disease risks and affected the overall quality of crops. Recently collected cocoa beans from the region show lower quality, with counts around 105 beans per 100 grams. The cocoa regulator allows exporters to purchase beans with counts ranging from 80 to 100 or slightly more for every 100 grams, with better quality cocoa having lower bean counts.

Meanwhile, stronger cocoa exports from Nigeria, the world’s sixth-largest producer, present a bearish signal. Nigeria’s cocoa exports for October increased by 15% year-over-year, totaling 20,508 MT.

In an opposing factor, the Ivory Coast regulator, Le Conseil Cafe-Cacao, raised its 2024/25 cocoa production estimate to a range of 2.1-2.2 MMT, up from June’s forecast of 2.0 MMT.

Recent global cocoa demand indicators have been a mixed bag. The National Confectioners Association reported a 12% year-over-year increase in North American Q3 cocoa grindings, reaching 109,264 MT. The Cocoa Association of Asia also noted a 2.6% rise in Q3 grindings, totaling 216,998 MT. However, the European Cocoa Association reported a 3.3% year-over-year decline in Q3 grindings, which stood at 354,335 MT.

Cocoa prices found some support after Ghana’s Cocoa Board (Cocobod) reduced its 2024/25 cocoa production estimate to 650,000 MT from June’s 700,000 MT. Due to adverse weather and crop diseases, Ghana’s cocoa harvest for 2023/24 has plummeted to a 23-year low of 425,000 MT. As the world’s second-largest cocoa producer, these developments are significant.

On the date of publication,

here.
More news from Barchart

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.