Cocoa Prices Showing Mixed Signals

May ICE NY cocoa (CCK24) on Wednesday closed up +221 (+2.30%), and May ICE London cocoa #7 (CAK24) closed down -3 (-0.04%).

Cocoa prices on Wednesday settled mixed. Prices consolidated below Tuesday’s all-time highs as a stronger dollar induced profit-taking in cocoa futures.

Global Supply Shortages Driving Prices Up

Global cocoa grinders are grappling with limited supplies, leading to cash market premiums to secure cocoa. The concerns stem from West African cocoa suppliers facing potential defaults on supply contracts. Cocoa prices have doubled since the start of the year, driven by the worst supply shortage in four decades.

The shrinking global cocoa supplies are pushing prices higher. Ghana and Ivory Coast, major cocoa producers, are experiencing significant production cuts due to adverse weather conditions and disease, amplifying supply concerns and boosting prices.

Tightening Supplies and Bullish Factors

Lower cocoa production in the Ivory Coast and slashed cocoa export projections from Nigeria are contributing to the tightening of cocoa supplies globally. Projections for upcoming mid-crops in West African countries have been revised down significantly, further fueling concerns and supporting prices.

In addition, dwindling ICE-monitored cocoa inventories in the U.S. and a projected widening global cocoa deficit for 2023/24 are underpinning the bullish sentiment in the cocoa market. The current supply-demand dynamics are driving a surge in cocoa prices, with expectations of a continued deficit in the upcoming year.

Market Impact and Demand Trends

Record-high cocoa prices are beginning to impact global demand, as seen in declining cocoa grindings in North America, Asia, and Europe. The rising prices are likely to influence consumption patterns and market dynamics, creating a ripple effect across the industry.

Despite the price-induced demand adjustments, the cocoa market remains volatile, with various factors like weather events, production forecasts, and supply chain disruptions shaping the future trajectory of cocoa prices.

More Cocoa News from Barchart

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.