Cocoa Prices Surge Amid Supply Concerns
March ICE NY cocoa (CCH25) increased by +340 (+3.75%), while March ICE London cocoa #7 (CAH25) rose by +105 (+1.38%).
Today, cocoa prices are on the rise, with both New York and London cocoa contracts reaching record highs. In fact, December London cocoa has achieved its highest price in 4-1/2 months. This surge is largely attributed to concerns over future cocoa supplies. Heavy rainfall in the Ivory Coast has caused reports of high mortality rates among cocoa buds, affecting the harvest. However, the gains in London cocoa were somewhat tempered by a two-week high for the British pound, making cocoa more expensive when priced in sterling.
Adverse weather in West Africa has severely impacted cocoa production. Flooding in the Ivory Coast has damaged fields, elevated disease risks, and decreased overall crop quality. Recent reports indicate that newly harvested cocoa beans from this region show lower quality, averaging about 105 beans per 100 grams. The Ivory Coast cocoa regulator permits exporters to purchase bean counts ranging from 80 to 100 or slightly higher per 100 grams, with higher quality cocoa typically having a lower bean count.
Globally, cocoa stockpiles are shrinking, which is a positive sign for prices. Cocoa inventories monitored by the ICE in U.S. ports have steadily declined over the past 1-1/2 years, dropping to a 19-year low of 1,565,246 bags as of Wednesday.
Stronger cocoa exports from Nigeria, the sixth-largest cocoa producer worldwide, serve as a counterbalance to rising prices. In October, Nigeria’s cocoa exports climbed +15% year-over-year to reach 20,508 metric tons.
The situation in the Ivory Coast, however, is similarly bearish for prices. Recent government statistics revealed that from October 1 to November 24, farmers exported 642,500 metric tons of cocoa, a significant increase of +34% from last year’s shipments of 415,523 metric tons during the same period. Additionally, the Ivory Coast’s cocoa regulator, Le Conseil Cafe-Cacao, raised its 2024/25 cocoa production estimate to between 2.1 and 2.2 million metric tons, up from an earlier forecast of 2.0 million metric tons.
Global cocoa demand news has been mixed. The National Confectioners Association reported on October 17 that cocoa grindings in North America for the third quarter rose +12% year-over-year, totaling 109,264 metric tons. Simultaneously, the Cocoa Association of Asia noted a +2.6% rise in cocoa grindings for the same period, reaching 216,998 metric tons. In contrast, the European Cocoa Association indicated a decline of -3.3% in European cocoa grindings, which totaled 354,335 metric tons.
A significant support factor for cocoa prices emerged when Ghana’s Cocoa Board (Cocobod) revised its 2024/25 cocoa production estimate down to 650,000 metric tons from a previous forecast of 700,000 metric tons on August 20. The country faced challenges due to adverse weather and crop diseases, causing its 2023/24 cocoa harvest to drop to a 23-year low of 425,000 metric tons. As the second-largest cocoa producer globally, Ghana’s harvest season began in October.
Additionally, the International Cocoa Association (ICCO) recently raised its estimates for global cocoa deficit for 2023/24 to -462,000 metric tons, the largest shortage in over 60 years, up from May’s estimate of -439,000 metric tons. The ICCO also lowered its production estimate for that year to 4.330 million metric tons from 4.461 million metric tons previously. The organization expects a cocoa stocks-to-grindings ratio of 27.4%, marking a 46-year low.
On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data provided are for informational purposes only. For further details, please see the Barchart Disclosure Policy.
The views and opinions expressed herein belong to the author and do not necessarily represent those of Nasdaq, Inc.
