Unprecedented Spike in Cocoa Prices Amid Global Supply Concerns Unprecedented Spike in Cocoa Prices Amid Global Supply Concerns

Actionable Trade Ideas

always free

Market Fluctuations in Cocoa Prices

The trading session on Tuesday saw May ICE NY cocoa closing down by -171 (-1.69%), while May ICE London cocoa #7 closed up by +108 (+1.30%). The day concluded with cocoa prices displaying a mixed performance.

Global Factors Driving Price Surge

The cocoa market is witnessing unparalleled hikes as concerns over dwindling global cocoa supplies persist. The new all-time highs witnessed by NY and London cocoa underscore the severity of the situation. However, profit-taking activity led to a decline in NY cocoa prices after the initial surge.

Impact of Production Declines

The dwindling cocoa production in Ivory Coast, the leading global producer, remains a key bullish element for cocoa prices. Data released by the Ivorian government on Tuesday revealed a substantial 27.8% decrease in cocoa shipments to ports compared to the previous year.

Challenges in Ghana’s Cocoa Industry

Ghana’s Cocoa Board (Cocobod) recently announced a significant reduction in cocoa harvest forecasts, blaming extreme weather and disease for this 22-year low in production.

Tightness in Cocoa Supplies

The concerns surrounding the West African mid-crop have heightened the tightness in cocoa supplies globally. A forecasted drop in mid-crop productions for Ghana and Ivory Coast, among others, is exacerbating supply constraints.

Market Response and Forecasts

Global cocoa grinders are eagerly securing cocoa supplies amidst fears of defaults from West African suppliers. The drastic price surge, witnessing a staggering 143% increase since the start of the year, stems from the most severe supply shortage in 40 years.

Projection of Future Trends

The International Cocoa Organization (ICCO) predicts a widening global cocoa deficit in the coming year, with implications for production and stock-to-grindings ratios. Unfavorable farming conditions in West Africa in recent times have contributed to this forecast.

Shifts in Global Demand

Record-high cocoa prices are beginning to impact global demand, with notable declines in cocoa grindings reported across North America, Asia, and Europe. The implications of this softening demand are reverberating in the industry.

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 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.

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.