Cocoa Prices Rise Sharply Amidst Supply Concerns
Key Drivers for Price Increases: The dollar’s decline and positive industry insights boost cocoa markets.
December ICE NY cocoa (CCZ24) closed up +436 (+6.30%) on Thursday, while December ICE London cocoa #7 (CAZ24) rose by +329 (+5.99%).
On Thursday, cocoa prices soared as a weakening dollar encouraged short covering in cocoa futures. Additionally, upbeat comments from Barry Callebaut’s CEO indicated that while West African cocoa crops have improved compared to last year, they have not yet reached the production levels seen in the 2022/23 season.
Supply concerns contributed to the rally in cocoa prices. Cocoa stockpiles monitored by ICE at U.S. ports have been declining for the past 17 months, hitting a 19-year low of 1,718,356 bags on Thursday.
Earlier in the week, cocoa prices experienced a downturn, reaching one-week lows after the dollar climbed to a four-month high. Furthermore, the Ivory Coast, the world’s largest cocoa producer, reported an increase in cocoa shipments. From October 1 to November 3, farmers exported 365,072 metric tons (MT) of cocoa, up +26% from the 288,686 MT shipped during the same period last year.
Price pressure also emerged when the Ivory Coast’s cocoa regulator, Le Conseil Cafe-Cacao, raised its 2024/25 production estimate to between 2.1 and 2.2 million metric tons (MMT), an increase from the June prediction of 2.0 MMT.
Recent reports on global cocoa demand were mixed. The National Confectioners Association revealed a +12% year-over-year increase in North American Q3 cocoa grindings, totaling 109,264 MT. The Cocoa Association of Asia reported a +2.6% rise in Q3 Asian cocoa grindings to 216,998 MT, while the European Cocoa Association indicated a -3.3% year-over-year decrease in European Q3 cocoa grindings to 354,335 MT.
Support for cocoa prices was bolstered when Ghana’s Cocoa Board (Cocobod) downgraded its 2024/25 production estimate to 650,000 MT from an earlier forecast of 700,000 MT. Adverse weather conditions and crop diseases led to Ghana’s 2023/24 cocoa harvest declining to a 23-year low of 425,000 MT. As the world’s second-largest cocoa producer, Ghana is set to start its 2024/25 cocoa harvest in October.
Conversely, an increase in cocoa production from Cameroon, the fifth-largest producer, presents a bearish trend for cocoa prices. According to the National Cocoa and Coffee Board, Cameroon’s cocoa production rose +1.2% year-over-year to 266,725 MT for the 2023/24 season. Additionally, Nigeria’s August cocoa exports also climbed by +6.8% year-over-year to 14,984 MT, with Nigeria holding the title of the sixth-largest cocoa producer.
On a more positive note, the International Cocoa Association (ICCO) announced on August 30 that it raised its global cocoa deficit estimate for 2023/24 to -462,000 MT from May’s estimate of -439,000 MT, marking the largest deficit in over six decades. The ICCO also revised its cocoa production estimate down to 4.330 MMT, compared to the previous forecast of 4.461 MMT, predicting a stocks-to-grindings ratio of just 27.4%, the lowest in 46 years.
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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
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