Cocoa Prices Surge Amid Deteriorating Supply Conditions
March ICE NY cocoa (CCH25) closed up +521 (+4.61%) on Monday, while March ICE London cocoa #7 (CAH25) rose by +427 (+4.78%).
Recent Price Rally Driven by Supply Concerns
Cocoa prices have seen a significant gain, extending a 7-week rally as both March NY cocoa and March London cocoa reached new contract highs. The surge in prices is attributed to a poor outlook for West Africa’s mid-crop, driven by worsening dry conditions. Maxar Technologies has indicated that these dry spells may negatively affect the early development of the cocoa crop scheduled for harvest in April, and the seasonal Harmattan winds could exacerbate the situation.
Decreasing Cocoa Stockpiles Support Higher Prices
Declining global cocoa inventories are also pushing prices upward. According to data monitored by ICE, cocoa stocks in U.S. ports have dropped over the last 1-1/2 years, reaching their lowest level in 20 years at 1,417,061 bags.
Global Cocoa Deficit Heightens Concerns
Additionally, the International Cocoa Association (ICCO) recently raised its projection for the global cocoa deficit for 2023/24 to -478,000 MT, up from -462,000 MT. This marks the largest deficit in over 60 years. The ICCO also revised its cocoa production forecast down to 4.380 MMT, a 13.1% decrease compared to last year.
Extreme Weather Impacts Quality
Heavy rainfall in West Africa has led to increased mortality rates of cocoa buds and subsequently lifted cocoa prices sharply. Flooding in the Ivory Coast has raised the risk of disease and degraded crop quality. Recent shipments from the Ivory Coast indicate lower-quality cocoa beans, with counts around 105 beans per 100 grams. Exporters are allowed to buy beans counting from 80 to 100 or slightly more for every 100 grams, with better quality beans having a lower count.
Increased Supply from Ivory Coast
Interestingly, an uptick in cocoa supplies from the Ivory Coast, the world’s largest producer, may exert downward pressure on prices. Government data revealed that Ivory Coast farmers shipped 894,009 MT of cocoa to ports from October 1 to December 15, marking a 33% increase over the 671,544 MT shipped during the same period last year.
Nigeria’s Exports Also on the Rise
At the same time, Nigeria, the sixth-largest cocoa producer globally, has also reported a rise in cocoa exports, with October shipments climbing 15% year-over-year to 20,508 MT.
Mixed Demand Signals
The latest news on global cocoa demand presents a mixed picture. The National Confectioners Association reported a 12% year-over-year increase in North American Q3 cocoa grinding, totaling 109,264 MT. The Cocoa Association of Asia noted a 2.6% rise in Asian cocoa grinding to 216,998 MT during the same quarter. However, European cocoa grindings fell by 3.3% year-over-year to 354,335 MT, according to the European Cocoa Association.
Ghana’s Production Decline
In a further sign of tightening supply, Ghana’s Cocoa Board (Cocobod) cut its 2024/25 production estimate for Ghana cocoa to 650,000 MT from a previous forecast of 700,000 MT. Ghana’s cocoa harvest for 2023/24 has already dipped to a 23-year low of 425,000 MT due to adverse weather and crop diseases, solidifying its position as 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.
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