Cocoa Prices Surge Amid Production Worries in West Africa

March ICE NY cocoa (CCH25) on Tuesday rose by +168 (+1.46%), while March ICE London cocoa #7 (CAH25) gained +29 (+0.32%).

Concerns About Cocoa Production Drive Prices Up

Cocoa prices continued their upward trend from Monday, fueled by concerns over crop production in West Africa. Farmers in the Ivory Coast and Nigeria reported that their cocoa trees are experiencing issues due to the seasonal dry and dusty Harmattan winds, leading to yellowing leaves and wilting cocoa pods.

Swinging Prices Amid Thin Trading Conditions

The past week has seen reduced liquidity in cocoa futures, partly due to thin holiday trading conditions and increased margin calls. These factors have caused sharp price fluctuations.

Historical Context: Record Highs in Cocoa Futures

On December 18, NY Cocoa reached its all-time nearest-futures high, while London Cocoa hit an 8-month nearest-futures high. These record prices followed warnings from Maxar Technologies about dry conditions impacting the early development of the April cocoa crop.

Decreasing Cocoa Stockpiles Are Positives for Prices

Global cocoa inventories monitored by ICE have decreased significantly, hitting a 20-year low of 1,367,084 bags last Friday. This trend is particularly bullish for cocoa prices.

Weather Takes a Toll on Harvest Predictions

Ghana’s cocoa harvest forecast was recently cut by -5% for 2024/25 due to weather concerns, marking the second downward revision this season. Additionally, the International Cocoa Association (ICCO) reported on November 22 that the global cocoa deficit for 2023/24 is now estimated at -478,000 MT, the largest in over six decades.

Heavy Rain Affects Cocoa Quality

Recent heavy rain in West Africa has raised concerns regarding the mortality rates of cocoa buds and crop quality. In the Ivory Coast, flooding has led to increased disease risks, with recently harvested beans displaying lower quality and higher bean counts.

Growing Shipments Complicate Price Trends

Despite the rising cocoa prices, the continued high shipments from Ivory Coast farmers may pressure prices downward. From October 1 to December 29, farmers shipped 1.05 MMT of cocoa to ports, which is up +27% from 824,730 MT during the same period last year.

Mixed Global Demand Signals

Global demand for cocoa has shown mixed results. The North American Q3 cocoa grindings increased by +12% year-over-year to 109,264 MT, while Q3 cocoa grindings in Asia rose by +2.6% to 216,998 MT. Conversely, the European Cocoa Association reported a -3.3% decline in Q3 grindings to 354,335 MT.

Ghana’s Production Challenges Impact Supply

Ghana’s Cocoa Board adjusted its 2024/25 cocoa production estimate downward to 650,000 MT, citing bad weather and disease, which has significantly impacted this year’s harvest, dropping it to a 23-year low of 425,000 MT.

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.