Cocoa Prices Experience Fluctuations Amid Supply Challenges
Recent volatility in cocoa prices highlights the impact of weather and supply chain issues.
March ICE NY cocoa (CCH25) closed on Tuesday up +106 (+0.90%), while March ICE London cocoa #7 (CAH25) dropped down -238 (-2.54%). Cocoa prices have remained unpredictable in the thin holiday trading environment, consolidating just below recent peaks. Last Wednesday, NY cocoa reached a record high for nearest-futures, whereas London cocoa recorded an 8-month high. After facing long liquidation pressure, NY cocoa found stability on Tuesday.
On Monday, cocoa prices faced downward pressure due to ongoing high shipments from Ivorian farmers, the world’s largest cocoa producers. Government statistics revealed that from October 1 to December 15, Ivory Coast farmers sent 970,945 MT of cocoa to ports, marking a significant +30% increase compared to 744,967 MT during the same period last year.
Historically, cocoa prices surged in November and December, driven by concerns regarding the West African cocoa mid-crop outlook. Maxar Technologies indicated that dry conditions in West Africa could negatively affect the early development of the mid-year cocoa crop, which is typically harvested in April. The arrival of the seasonal Harmattan winds may exacerbate these difficulties.
On a more optimistic note, Ghana recently adjusted its 2024/25 (September-August) cocoa harvest forecast down by -5%, marking the second reduction this season due to adverse weather conditions.
Decreasing global cocoa stockpiles are boosting prices as well. ICE-monitored cocoa inventories in US ports have been declining for the past year and a half, recently hitting a 20-year low of 1,386,781 bags.
Adding to the bullish outlook, the International Cocoa Association (ICCO) raised its 2023/24 global cocoa deficit estimate to -478,000 MT in November from a previous estimate of -462,000 MT, signifying the largest deficit seen in over 60 years. ICCO also reduced its production estimate for 2023/24 to 4.380 MMT from May’s figure of 4.461 MMT, reflecting a -13.1% year-over-year decrease. Moreover, ICCO now projects a 2023/24 global cocoa stocks-to-grindings ratio of 27.0%, the lowest in 46 years.
Unfavorable weather conditions in West Africa have led to increased mortality rates among cocoa buds, raising cocoa prices sharply. Heavy rainfall in the Ivory Coast has resulted in flooded fields, heightened disease risks, and affected crop quality. Recently harvested beans from the area indicate lower quality, averaging about 105 beans per 100 grams. The regulatory body in the Ivory Coast permits exporters to purchase bean counts of 80 to 100 or slightly more for every 100 grams, where higher quality cocoa corresponds to a lower count.
Conversely, Nigeria, the sixth-largest cocoa producer globally, has reported an increase in exports. In October, Nigeria’s cocoa exports jumped by +15% year-on-year to 20,508 MT, which may exert downward pressure on prices.
On the flip side, the Ivory Coast regulator, Le Conseil Cafe-Cacao, raised its production forecast for 2024/25 to a range of 2.1-2.2 MMT, up from June’s projection of 2.0 MMT.
Mixed signals are emerging from global cocoa demand. The National Confectioners Association reported on October 17 that North American cocoa grindings rose by +12% year-on-year to 109,264 MT. Meanwhile, the Cocoa Association of Asia noted a +2.6% year-on-year increase in cocoa grinding to 216,998 MT in Q3. However, the European Cocoa Association reported a decline in Q3 European cocoa grindings, down -3.3% year-on-year to 354,335 MT.
Additionally, cocoa prices found support after Ghana’s Cocoa Board (Cocobod) reduced its 2024/25 production estimate to 650,000 MT from a prior forecast of 700,000 MT due to adverse weather and crop disease. This has led Ghana’s 2023/24 cocoa harvest to plummet to a 23-year low of 425,000 MT, affecting the world’s second-largest cocoa producer significantly.
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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy
here.
More news from Barchart
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
