Cocoa Prices Surge Amid Global Supply Concerns
March ICE NY cocoa (CCH25) increased by +330 (+3.12%), while March ICE London cocoa #7 (CAH25) rose by +252 (+2.94%).
Growing Worries Over Export Slowdown
Cocoa prices experienced a significant boost today, driven by fears of dwindling global supplies due to a slowdown in Ivory Coast cocoa exports. The latest government data reveals that Ivory Coast farmers have shipped 1.16 MMT of cocoa this marketing year, marking an increase of over +27% from last year. However, this pace has dropped from the impressive 35% rise reported last month. Additionally, a surge in the dollar index (DXY00) to a two-year high has somewhat limited the gains in cocoa prices.
Tightening Stockpiles Support Prices
The decrease in global cocoa stockpiles adds further pressure upward on prices. For the last 18 months, ICE-monitored cocoa inventories in US ports have been on a downward trend, recently hitting a 20-year low of 1,315,922 bags.
Cocoa prices found additional support following Hershey Co.’s request for Commodity Futures Trading Commission (CFTC) approval to purchase a significant volume of cocoa via the ICE Futures Exchange, citing global supply constraints. Reports indicate that Hershey intends to secure more than 90,000 MT of cocoa, vastly exceeding the current exchange limits.
Impact of Dry Conditions on Crop Quality
Further price support comes from crop production fears, as farmers in Ivory Coast and Nigeria report that the harmful Harmattan winds are affecting cocoa trees. Farmers are noticing leaves turning yellow and cocoa pods wilting.
The situation worsened when, on December 18, both NY and London Cocoa reached their highest futures on concerns regarding the Mid-Crop outlook for West Africa. Maxar Technologies has warned that these dry conditions could significantly hinder the early growth of the cocoa crop expected for harvest in April.
Forecast for Global Cocoa Deficit
On November 22, the International Cocoa Organization (ICCO) revised its global cocoa deficit forecast for 2023/24 to -478,000 MT, which is the largest shortfall in over 60 years. Furthermore, ICCO has adjusted its production estimate down to 4.380 MMT, reflecting a decrease of -13.1% compared to last year, and projected a cocoa stocks/grindings ratio of 27.0%, a record low in 46 years.
Weather Challenges Affecting Crop Quality
Excessive rain in West Africa has raised concerns about high mortality rates in cocoa buds, causing a spike in prices. Flooded fields in Ivory Coast have resulted in increased disease risks and compromised crop quality. Recent assessments show lower quality cocoa beans from the region, with a higher count of approximately 105 beans per 100 grams. Typically, quality cocoa commands lower bean counts.
On a bearish note, strong cocoa exports from Nigeria, the sixth-largest producer, have also impacted prices negatively. Nigeria’s cocoa exports in November surged by +35% year-on-year to reach 38,015 MT.
Ivorian Production Adjustments
Compounding these factors, the Ivory Coast’s regulatory body, Le Conseil Cafe-Cacao, has increased its cocoa production estimate for 2024/25 to a range of 2.1-2.2 MMT, adjusting from the previous June forecast of 2.0 MMT.
Mixed Global Demand Signals
Global demand for cocoa presents a mixed picture. The National Confectioners Association reported on October 17 that North American cocoa grindings in Q3 rose by +12% year-on-year, reaching 109,264 MT. The Cocoa Association of Asia noted a +2.6% rise in Q3 grinding to 216,998 MT. Conversely, the European Cocoa Association indicated a -3.3% decline in Q3 cocoa grindings, totaling 354,335 MT.
Support for cocoa prices was bolstered when Ghana’s Cocoa Board (Cocobod) revised its 2024/25 production estimate down to 650,000 MT—lowering its June forecast of 700,000 MT—due to adverse weather and crop diseases. Ghana stands as the world’s second-largest cocoa producer.
On the date of publication, Rich Asplund did not hold (directly or indirectly) any positions in the securities mentioned in this article. All information and data are for informational purposes only. For more details, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
