Cocoa Prices Dip as Harvest Boosts Supply Amid Mixed Global Demand
December ICE NY cocoa (CCZ24) is currently down -234 (-2.73%), while December ICE London cocoa #7 (CAZ24) has decreased by -29 (-0.40%).
Favorable Harvest Conditions Pressure Prices
Cocoa prices are showing a moderate decline, largely due to favorable weather in West Africa, which has enabled farmers to return to the fields and continue the harvest of the main crop.
Increased Supply from Ivory Coast Affects Market
An increase in cocoa supplies from the Ivory Coast, the world’s largest producer, is also contributing to the downturn in prices. Data released on Monday indicated that Ivory Coast farmers shipped 548,494 MT of cocoa to ports from October 1 to November 17, marking a 32% increase from the 415,523 MT shipped during the same period last year. Additionally, cocoa prices came under pressure when the Ivory Coast regulator, Le Conseil Cafe-Cacao, raised its production estimate for the 2024/25 season to a range of 2.1-2.2 MMT, up from 2.0 MMT in June.
Weather Impacts on Crop Quality
Earlier adverse weather conditions in West Africa momentarily boosted cocoa prices, with London cocoa reaching a four-month high last Tuesday and NY cocoa hitting a two-and-a-half-month high the previous Friday. Heavy rains in the Ivory Coast caused field flooding, which increased the risk of crop diseases and compromised the quality of the cocoa. Recently harvested beans from this region exhibited a quality drop, with counts around 105 beans per 100 grams. The Ivory Coast regulator permits exporters to buy beans that show counts of 80 to 100 or slightly higher to meet quality standards.
Decreasing U.S. Cocoa Stockpiles Favor Price Stability
A decrease in global cocoa stockpiles can also support prices in the market. Cocoa inventories monitored by ICE at U.S. ports have been declining for the past 17 months, reaching a 19-year low on Tuesday with just 1,620,242 bags.
Mixed Signals on Global Demand
Recent reports on global cocoa demand paint a mixed picture. According to the National Confectioners Association, North America’s cocoa grindings increased by 12% year-over-year to 109,264 MT in Q3. Similarly, the Cocoa Association of Asia reported a 2.6% rise in cocoa grindings, totaling 216,998 MT. In contrast, European grindings fell by 3.3% year-over-year to 354,335 MT, as reported by the European Cocoa Association.
Ghana’s Production Cuts Support Higher Prices
The Ghana Cocoa Board (Cocobod) lowered its 2024/25 production estimate to 650,000 MT from its earlier June projection of 700,000 MT due to adverse weather and crop diseases. Ghana, the world’s second-largest cocoa producer, saw its 2023/24 harvest sink to a 23-year low of 425,000 MT. This harvest season started in October.
Regional Production Increases Add Downward Pressure
In contrast, an increase in cocoa production in Cameroon—now the world’s fifth-largest cocoa producer—added to the bearish outlook on prices. The National Cocoa and Coffee Board reported that Cameroon’s production rose by 1.2% year-over-year to 266,725 MT for the 2023/24 season. Additionally, Nigeria’s cocoa exports climbed by 6.8% year-over-year to reach 14,984 MT.
International Deficit Estimates Hint at Long-Term Demand Issues
In a potentially bullish indicator, the International Cocoa Association (ICCO) raised its global cocoa deficit estimate for 2023/24 to 462,000 MT, up from May’s 439,000 MT—the most significant deficit seen in over 60 years. They also revised their production estimate down to 4.330 MMT from the previous 4.461 MMT, projecting a stocks-to-grindings ratio at 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 for informational purposes only. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.
