Cocoa Prices Surge Amid Production Concerns
March ICE NY cocoa (CCH25) has risen +1,193 (+11.78%), while March ICE London cocoa #7 (CAH25) has increased by +997 (+12.28%).
Crops Under Threat in West Africa
The rise in cocoa prices is largely due to worries about crop production in West Africa. Cocoa farmers from Ivory Coast and Nigeria reported that their cocoa trees are starting to suffer from the dry and dusty Harmattan winds. This has resulted in yellowing leaves and wilting cocoa pods.
Previous Record Highs
On December 18, NY Cocoa hit an all-time nearest-futures high, and London Cocoa reached an 8-month nearest-futures high due to the bleak outlook for the West African cocoa mid-crop. Maxar Technologies warned that the ongoing dry conditions could harm the early development of the mid-year cocoa crop scheduled for harvest in April, worsening with the arrival of Harmattan winds.
Decreasing Cocoa Stockpiles
Further supporting higher prices is the declining global cocoa stockpile. ICE-monitored cocoa inventories in US ports have been decreasing for the past 1.5 years, hitting a 20-year low of 1,367,084 bags last Friday.
Ghana’s Production Forecast Revised
Ghana recently lowered its 2024/25 cocoa harvest forecast by -5% due to weather issues, marking the second downward revision this season.
Global Chocolate Supply in Decline
The International Cocoa Association (ICCO) raised its 2023/24 global cocoa deficit estimate to -478,000 MT, the largest shortfall in over 60 years. ICCO also cut its cocoa production estimate to 4.380 million metric tons, down 13.1% from last year, predicting a stocks-grindings ratio of 27.0%—the lowest in 46 years.
Weather Impacts Quality and Quantities
Heavy rain in West Africa has caused high mortality rates of cocoa buds and pushed prices up further. In Ivory Coast, fields have flooded, increasing the risk of disease and hindering crop quality. Recently harvested beans showed lower quality, with counts of about 105 beans per 100 grams. Exporters are permitted to buy beans in counts from 80 to 100 per 100 grams, with the best quality typically having lower counts.
High Shipments Could Push Prices Down
Despite these concerns, deliveries from Ivory Coast, the largest producer of cocoa, remain strong. Data shows that farmers shipped 1.05 million metric tons of cocoa from October 1 to December 29—up 27% from the same period last year.
Nigerian Exports Increase
Nigeria, the world’s sixth-largest cocoa producer, also saw a 35% year-on-year rise in cocoa exports, reaching 38,015 metric tons in November, contributing to bearish sentiments for cocoa prices.
Ivory Coast’s Production Estimate Adjusted
In a potential counterbalance to the negative impacts, the Ivory Coast regulator, Le Conseil Cafe-Cacao, raised its cocoa production estimate to between 2.1 million and 2.2 million metric tons, up from a previous June forecast of 2.0 million metric tons.
Mixed Signals in Global Demand
Updates on cocoa demand show mixed results. The National Confectioners Association reported a 12% increase in North American cocoa grindings in Q3, totaling 109,264 metric tons. Similarly, the Cocoa Association of Asia noted a 2.6% rise in Q3 Asian cocoa grinding to 216,998 metric tons. However, the European Cocoa Association indicated a drop of 3.3% in European Q3 cocoa grindings, which reached 354,335 metric tons.
Ghana’s Production Affected by Bad Weather
Prices found support after Ghana’s Cocoa Board cut its 2024/25 production estimate to 650,000 metric tons, down from an earlier forecast of 700,000 metric tons. Bad weather and crop diseases have resulted in Ghana’s 2023/24 cocoa harvest hitting a 23-year low of 425,000 metric tons.
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.
