Cocoa Prices Reach Record Highs Amid West African Crop Concerns
Recent Market Movements Reflect Supply Shortages and Increased Deficits
March ICE NY cocoa (CCH25) closed Wednesday up +800 (+6.80%), while March ICE London cocoa #7 (CAH25) rose +660 (+7.12%).
On Wednesday, cocoa prices surged, marking an all-time nearest-futures high for NY cocoa and an 8-month nearest-futures high for London cocoa. The dramatic price increases follow a decline in the West African cocoa mid-crop outlook. Maxar Technologies has warned that dry conditions in West Africa may negatively impact the early growth of the cocoa crop set to be harvested in April. Furthermore, the arrival of seasonal Harmattan winds could exacerbate these adverse growing conditions.
Support for higher cocoa prices is also driven by dwindling global cocoa inventories. In fact, ICE-monitored cocoa supplies in U.S. ports have been decreasing over the past 1.5 years, hitting a 20-year low of 1,400,760 bags on Wednesday.
The International Cocoa Association (ICCO) significantly contributed to the price rise by adjusting its 2023/24 global cocoa deficit estimate from -462,000 MT in May to a new estimate of -478,000 MT, marking the most substantial deficit in over 60 years. Additionally, ICCO reduced its 2023/24 cocoa production forecast to 4.380 MMT, a 13.1% decline from the previous year’s figures.
Reports from West Africa indicate that heavy rains have caused high mortality rates among cocoa buds, further pushing prices upward. In the Ivory Coast, the deluge has led to flooded fields, increased disease risk, and impacted crop quality. Recently harvested cocoa beans from the area show lower quality, with approximately 105 beans observed per 100 grams; the Ivory Coast cocoa regulator permits exporters to accept counts ranging from 80 to 100 beans for every 100 grams, with lower counts indicating higher quality cocoa.
In contrast to the increasing prices, cocoa supply from the Ivory Coast, the world’s top cocoa producer, has risen. Recent government data reported shipments from October 1 to December 15 of 894,009 MT, reflecting a 33% increase from the previous year’s total of 671,544 MT during the same period.
Additionally, stronger cocoa exports from Nigeria, the world’s sixth-largest producer, may suppress prices, as exports in October rose by 15% year-on-year to reach 20,508 MT.
On a positive note for cocoa production, the Ivory Coast regulator, Le Conseil Café-Cacao, on October 18, raised its 2024/25 cocoa production estimate to between 2.1 and 2.2 MMT, up from a previously forecasted 2.0 MMT reported in June.
Mixed signals have emerged regarding global cocoa demand. The National Confectioners Association announced on October 17 that North American Q3 cocoa grindings rose by 12% year-on-year to 109,264 MT. Similarly, the Cocoa Association of Asia reported a 2.6% year-on-year increase in Q3 cocoa grinding, totaling 216,998 MT. However, the European Cocoa Association indicated a decline in European Q3 cocoa grindings, down 3.3% year-on-year to 354,335 MT.
Additionally, support for cocoa prices materialized when Ghana’s Cocoa Board (Cocobod) cut its 2024/25 Ghana cocoa production estimate to 650,000 MT from 700,000 MT as projected in June. Ghana, the second-largest cocoa producer globally, has faced challenging weather and crop diseases, resulting in a 23-year low cocoa harvest of 425,000 MT for 2023/24.
On the date of publication,
Rich Asplund
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