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Rising Cocoa Prices Spark Profit-Taking Trend in Market

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Cocoa Prices Spiral Downwards Amid Dollar Strength

In today’s market, the May ICE NY cocoa (CCK24) is observing a decline of -151 (-1.57%), and the May ICE London cocoa #7 (CAK24) is down by -240 (-2.92%). Cocoa prices are showing a moderate decrease as a robust dollar causes profit-taking in cocoa futures. These prices have surged to record highs, triggering a retreat among investors.

Cocoa Market Grapples with Supply Constraints

The global cocoa industry is facing supply shortages, leading to a surge in demand for cocoa beans. The cash market is witnessing heightened activity as cocoa grinders seek to secure supplies amidst fears of defaults by West African cocoa suppliers on their contracts. The market has experienced a staggering 133% increase in cocoa prices since the beginning of the year, fueled by the most severe supply shortage witnessed in 40 years.

Shrinking Global Supplies Propel Cocoa Prices Higher

Looming concerns over dwindling cocoa supplies globally are driving prices upwards. Recent reports from Ghana’s Cocoa Board (Cocobod) indicate a significant reduction in the country’s cocoa harvest forecast for 2023/24, with estimates plunging to a 22-year low. Additionally, Ivory Coast, the leading cocoa producer globally, has witnessed a substantial drop in cocoa shipments to ports, further intensifying concerns about supply shortages.

Forecasting a Challenging Mid-Crop Season

The concerns extend to the West African mid-crop season, with anticipated reductions in cocoa supplies from countries such as Ghana, the Ivory Coast, and Nigeria. Projections for the upcoming mid-crop harvests in these regions have been revised significantly downwards, painting a grim picture of the cocoa market’s short-term future.

Global Deficit Predicted for Cocoa Market

The International Cocoa Organization (ICCO) recently projected a widening global cocoa deficit for the 2023/24 season, signaling a challenging period ahead for industry players. Reduced cocoa production and declining global grindings are expected to push the stock-to-grindings ratio to its lowest level in over four decades, reflecting the severity of the supply crunch.

Changing Dynamics in Cocoa Demand

Despite the soaring cocoa prices, demand for the commodity is showing signs of fatigue. Reports from various cocoa associations reveal a decline in cocoa grindings across North America, Asia, and Europe, suggesting that record-high prices may be tempering consumer consumption habits.

Market Uncertainty and Price Concerns

The halt in forward cocoa sales by the Ivory Coast cocoa regulator adds a layer of uncertainty to the market, amplifying concerns about future supply levels. With current prices at historic peaks and supply constraints looming, the cocoa market is navigating treacherous waters in the quest for stability and sustainability.

Global Impact on Cocoa Prices

From El Nino weather events to disease outbreaks on cocoa farms, various factors are contributing to the volatility in cocoa prices worldwide. As the market grapples with supply challenges and demand fluctuations, investors and industry stakeholders are closely monitoring developments to navigate the evolving landscape of the cocoa 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.

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