Global Supply Concerns Propel Cocoa Prices

Cocoa prices have hit new all-time highs, as global supply worries come to a head. The cash market is witnessing increased demand from cocoa grinders aiming to secure supplies amidst growing fears that West African suppliers may default on contracts.

Ivory Coast’s Declining Cocoa Production

The Ivory Coast, the world’s largest cocoa producer, is experiencing a significant drop in cocoa production. Data released on Monday revealed a 28% decrease in cocoa shipments to ports since last year. Additionally, the Ivory Coast’s mid-crop, starting in April, is projected to plummet by 33% to 400,000 MT from 600,000 MT in the previous year. Analysts anticipate an 8-year low of 1.75 MMT for the 2023/24 cocoa production, marking a decline of 21.5% compared to the previous year.

Trader Ecom Agroindustrial projects Ivory Coast’s cocoa production to hit an 8-year low.

Global Deficit and Inventory Downturn

ICE-monitored cocoa inventories in U.S. ports have reached a three-year low of 4,054,349 bags, further adding to the bullish sentiment. The International Cocoa Organization (ICCO) has projected a significant global deficit for 2023/24, expecting a plunge in global cocoa production by 11% Year-on-Year, resulting in the lowest stock-to-grindings ratio in over four decades.

ICCO foresees a substantial global cocoa deficit in the upcoming year.

Weather Patterns Influence Cocoa Production

Unfavorable weather conditions and crop diseases in West Africa have hindered cocoa production, contributing to the surge in cocoa prices. The current El Nino weather event is also playing a role after a similar event in 2016 led to a drought, propelling cocoa prices to a 12-year high.

Crop diseases and weather patterns in West Africa contribute to the rise in cocoa prices.

Nigeria’s Impact on Cocoa Prices

Nigeria, the fifth-largest cocoa producer globally, witnessed a 15% drop in January cocoa exports, further supporting the uptrend in prices.

Uncertainty in Ivory Coast’s Cocoa Sales

Highlighting the supply concerns, the Ivory Coast cocoa regulator has suspended forward cocoa sales for the 2024/25 season until they attain a clearer production outlook. This move exacerbates uncertainties in the region’s cocoa supplies.

Global Demand Dips Amidst Record Prices

The surge in cocoa prices due to supply constraints has started to impact global demand. North American, Asian, and European quarterly cocoa grindings have declined year-on-year, signaling a potential downturn in consumption.

Global cocoa demand shows signs of retreat amidst soaring prices.

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 Policyhere.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.