Cocoa Prices Surge Amid Supply Concerns and Global Deficit
Record Deficits and Weather Challenges Impact Cocoa Market
March ICE NY cocoa (CCH25) Friday closed up +357 (+3.94%), and March ICE London cocoa #7 (CAH25) closed up +96 (+1.26%).
Cocoa prices rose significantly on Friday, with both March NY and London cocoa reaching contract highs. Additionally, December London cocoa posted its highest level in four and a half months. The International Cocoa Association (ICCO) recently updated its forecast, projecting a global cocoa deficit of -478,000 MT for 2023/24, an increase from May’s estimate of -462,000 MT and marking the largest deficit in over six decades. The ICCO also reduced its production estimate for the same period to 4.380 MMT from 4.461 MMT, reflecting a year-over-year decline of 13.1%. Furthermore, ICCO noted that global cocoa stocks/grindings will drop to 27.0%, the lowest level in 46 years.
The recent surge in cocoa prices can be attributed to concerns over future supply. Heavy rainfall in the Ivory Coast has reported high mortality rates of cocoa buds on trees, raising fears about crop yields. However, gains in London cocoa were tempered by a rise in the British pound (^GBPUSD) to a two-week high, which made cocoa priced in sterling more expensive.
Weather conditions in West Africa have been a significant driver of price increases. Floods in the Ivory Coast have not only damaged crops but also heightened the risk of diseases, negatively affecting the quality of cocoa beans. Currently, harvested cocoa beans from this region indicate lower quality, with counts averaging about 105 beans per 100 grams. Exporters in the Ivory Coast are permitted to buy bean counts ranging from 80 to over 100 for every 100 grams; typically, higher quality cocoa has a lower bean count.
Globally, the decline in cocoa stockpiles is influencing prices positively. ICE-monitored cocoa inventories at US ports have been decreasing for the past 18 months, recently hitting a 19-year low of 1,565,246 bags.
On the flip side, stronger cocoa exports from Nigeria, ranked as the world’s sixth-largest producer, present a bearish factor for prices. In October, Nigeria’s cocoa exports increased by 15% year-over-year to 20,508 MT. Additional pressure on prices comes from increased supply from the Ivory Coast. Recent government data reveals that farmers have shipped 642,500 MT of cocoa to ports from October 1 to November 24, marking a 34% rise from last year’s 415,523 MT. Moreover, the Ivory Coast regulator, Le Conseil Cafe-Cacao, raised its production estimate for 2024/25 to a range of 2.1-2.2 MMT, up from an earlier forecast of 2.0 MMT.
Recent news on global cocoa demand presents a mixed picture. The National Confectioners Association reported on October 17 that North American cocoa grindings increased by 12% year-over-year in the third quarter, totaling 109,264 MT. Similarly, the Cocoa Association of Asia noted their grindings rose by 2.6% to 216,998 MT in the same quarter. However, the European Cocoa Association indicated a decline of 3.3% in European grindings, now at 354,335 MT.
Support for cocoa prices also stemmed from Ghana’s Cocoa Board (Cocobod), which cut its 2024/25 production forecast to 650,000 MT, down from June’s estimate of 700,000 MT. Bad weather and crop diseases have significantly impacted Ghana’s cocoa harvest, which fell to a 23-year low of 425,000 MT in 2023/24. As the world’s second-largest cocoa producer, Ghana’s harvest season began in October.
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.
