Cocoa Prices Rise Amid Supply Concerns from West Africa
April cocoa futures experiences gains as export issues loom in the Ivory Coast.
March ICE NY cocoa (CCH25) closed up +139 (+1.24%) on Monday, while March ICE London cocoa #7 (CAH25) rose +10 (+0.11%). Cocoa prices reached one-week highs, primarily due to concerns that decreasing cocoa exports from the Ivory Coast could limit global supplies. Although government data indicates that farmers in the Ivory Coast have shipped 1.11 million metric tons (MMT) of cocoa this marketing year—up more than 27% from last year—the growth has slowed significantly from the prior month’s 35% increase. In London, cocoa prices dropped from their peak as the British pound (^GBPUSD) gained +0.72%, reaching a four-session high. A stronger pound tends to make cocoa, priced in sterling, less competitive.
Global cocoa stockpiles are in decline, contributing to increased prices. Cocoa inventories monitored by ICE and held in U.S. ports have been decreasing over the past year and a half, recently dropping to their lowest level in 20 years at 1,351,516 bags. Concerns over crop production in West Africa further bolster cocoa prices. This week, some cocoa farmers in the Ivory Coast and Nigeria reported damage to cocoa trees due to the dry and dusty Harmattan winds, resulting in yellowing leaves and withering cocoa pods.
On December 18, NY Cocoa reached an all-time high for nearest futures, while London cocoa hit its highest point in eight and a half months, following negative forecasts for the West African mid-crop. Maxar Technologies cautioned that dry conditions could hinder the early stages of the April cocoa crop and that the Harmattan winds might exacerbate the impact.
Additionally, Ghana on December 20 lowered its 2024/25 cocoa harvest forecast by 5% due to ongoing weather issues, marking its second reduction for the season. The International Cocoa Association (ICCO) also raised its global cocoa deficit estimate for the 2023/24 crop year to 478,000 MT—up from the 462,000 MT projected in May—and noted that this is the largest deficit recorded in over 60 years. ICCO further cut its production estimate to 4.380 MMT, representing a 13.1% year-over-year decrease. The projected global cocoa stocks-to-grindings ratio has now fallen to 27.0%, the lowest in 46 years.
Heavy rainfall in West Africa has complicated matters, leading to high mortality rates of cocoa buds on trees and pushing cocoa prices up sharply. The flooding in the Ivory Coast increases the risks of disease and impacts crop quality. Recent cocoa beans harvested in the Ivory Coast indicate lower quality, showing counts of about 105 beans per 100 grams. Ivory Coast regulators permit exporters to accept bean counts between 80 and 100, with lower counts generally signifying better quality cocoa.
Despite the rising prices, continuous high cocoa shipments from Ivory Coast farmers are seen as bearish. Official data reveals that cocoa shipments from the Ivory Coast from October 1 to January 5 totaled 1.11 MMT, marking a 27.5% increase from 870,510 MT during the same period last year. Additionally, Nigeria, the sixth-largest cocoa producer, has reported a 35% year-over-year increase in cocoa exports for November, totaling 38,015 MT.
In another development, the Ivory Coast’s cocoa regulator, Le Conseil Cafe-Cacao, adjusted its 2024/25 cocoa production estimate upwards to between 2.1 and 2.2 MMT from a prior forecast of 2.0 MMT.
Recent global cocoa demand trends have been mixed. The National Confectioners Association reported a 12% year-over-year rise in North American cocoa grindings for the third quarter, reaching 109,264 MT. Meanwhile, the Cocoa Association of Asia noted a 2.6% increase in Asian cocoa grindings to 216,998 MT. However, the European Cocoa Association reported a decline in Q3 grindings by 3.3% to 354,335 MT.
Cocoa prices found support after Ghana’s Cocoa Board (Cocobod) downgraded its 2024/25 production estimate to 650,000 MT from the prior June estimate of 700,000 MT, citing bad weather and crop diseases. For context, Ghana’s 2023/24 cocoa harvest dropped to a 23-year low of 425,000 MT, highlighting its position as the world’s second-largest cocoa producer.
On the date of publication, Rich Asplund did not have positions in any of the securities mentioned in this article. All information and data are intended solely for informational purposes. For more details, please view the Barchart Disclosure Policy here.
The views expressed herein belong to the author and do not necessarily reflect those of Nasdaq, Inc.
