Cocoa Prices Climb Amid Production Challenges and Low Inventories
March ICE NY cocoa (CCH25) Friday closed up +101 (+0.91%), and March ICE London cocoa #7 (CAH25) closed up +46 (+0.51%).
Cocoa Futures See Moderate Gains
Cocoa prices rose moderately on Friday, buoyed by a weaker dollar that encouraged some short covering in futures. The support also comes from dwindling global cocoa stockpiles, which have been falling for the past 18 months. Recently, ICE-monitored cocoa inventories at U.S. ports reached a two-decade low of 1,361,633 bags.
Weather Concerns Affecting West African Cocoa Farms
Concerns over crop production in West Africa are pushing cocoa prices higher. Farmers in Ivory Coast and Nigeria have reported that their cocoa trees are experiencing negative effects from the Harmattan winds. These seasonal winds have caused leaves to turn yellow and cocoa pods, known as cherelles, to wither.
Liquidity Issues Lead to Volatile Markets
Thin trading during the holiday season combined with increased margin calls has led to reduced liquidity in cocoa futures over the past week. As a result, prices have seen some significant fluctuations.
Record Highs: A Snapshot of Current Trends
On December 18, NY Cocoa recorded an all-time high for near-futures, while London Cocoa reached an 8-month peak, reflecting the worsening outlook for West Africa’s mid-crop. Maxar Technologies has cautioned that the ongoing dry conditions are likely to hinder the early development of cocoa crops expected to be harvested in April.
Ghana’s Harvest Forecast Downgraded
On December 20, Ghana reduced its 2024/25 cocoa harvest forecast by 5%, marking the second downward revision of the season due to weather-related worries.
Global Cocoa Deficit Hits 60-Year High
On November 22, the International Cocoa Association (ICCO) raised its global cocoa deficit estimate for 2023/24 to -478,000 MT, up from -462,000 MT, signaling the biggest deficit in over six decades. The ICCO also lowered its cocoa production estimate to 4.380 MMT, a decrease of 13.1% year-on-year, and noted that the global cocoa stocks/grindings ratio stands at 27.0%, a 46-year low.
Rainfall Impacts Crop Quality
Heavy rains in West Africa have led to reports of high mortality rates among cocoa buds and pushed prices sharply higher. In the Ivory Coast, flooding has increased disease risks, negatively affecting crop quality. The most recently harvested beans show poorer quality, with around 105 beans per 100 grams, contrasting with the best quality requirement of a lower count.
Exports Surge from Leading Producers
Despite quality concerns, significant cocoa shipments continue from the Ivory Coast, the leading producer. Government data indicates that farmers shipped 1.05 MMT of cocoa to ports from October 1 to December 29, a 27% increase from 824,730 MT during the same period last year. Nigeria also posted a strong performance, with cocoa exports rising 35% year-on-year to 38,015 MT.
Mixed Signals for Global Cocoa Demand
Recent global cocoa demand data presents a mixed picture. The National Confectioners Association noted a 12% year-on-year increase in North American cocoa grindings for Q3, totaling 109,264 MT. Conversely, the European Cocoa Association reported a decline of 3.3% year-on-year for European grindings, which fell to 354,335 MT.
Struggles for Ghana’s Cocoa Production
Support for cocoa prices was reinforced when Ghana’s Cocoa Board (Cocobod) reduced its 2024/25 production estimate to 650,000 MT due to adverse weather and disease issues. Ghana’s 2023/24 cocoa harvest has plummeted to a 23-year low of 425,000 MT, further emphasizing the struggles faced by the world’s second-largest cocoa producer.
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.
