Cocoa Prices Dip Amid Mixed Market Signals
December ICE NY cocoa (CCZ24) Thursday closed down -57 (-0.77%), while December ICE London cocoa #7 (CAZ24) closed down -13 (-0.22%).
Market Dynamics Behind Price Fluctuations
Cocoa prices retreated from a one-week high on Thursday, as the dollar index (DXY00) rebounded from a previous low. This recovery created pressure on cocoa futures after a sharp rise early in the week.
Outside Factors Impacting Cocoa Prices
The drop in London cocoa prices was somewhat constrained by the British pound (^GBPUSD) falling to a 2.5-month low. A weaker pound makes cocoa imported in sterling cheaper.
Weather Woes Affect Cocoa Production
Heavy rainfall in cocoa-producing regions of Africa has led to flooding, hindered access to farms, and increased the risk of cocoa disease, which supports cocoa prices.
Supply Constraints Highlighted by JPMorgan
On Tuesday, JPMorgan predicted a cocoa deficit of 100,000 MT for the 2024/25 marketing year, a revision from a previous neutral outlook and against general market expectations for small surpluses. The analyst noted that there will likely be higher cocoa prices for an extended period due to ongoing supply challenges and strong demand.
Declining Cocoa Inventories Bolster Prices
Decreasing global cocoa supplies add to bullish sentiment. The total inventories monitored by ICE in U.S. ports have been on a decline for 17 months and recently hit a 19-year low of 1,770,382 bags.
Ivory Coast’s Production Pressure
Despite abundant harvests, the Ivory Coast’s cocoa production may exert downward pressure on prices. Recent government data showed that shipments from October 1 to October 27 reached 284,633 MT, up 26% from 225,698 MT in the same period last year. The Ivory Coast remains the world’s largest cocoa supplier.
Production Estimates Shift Seen in Ivory Coast
On October 18, the Ivory Coast regulatory body, Le Conseil Cafe-Cacao, raised its production estimate for 2024/25 to between 2.1 and 2.2 MMT, up from 2.0 MMT estimated in June.
Global Demand Signals Present a Mixed Bag
Recent reports on global cocoa demand are mixed. The National Confectioners Association indicated that North American cocoa grindings rose 12% year-on-year to 109,264 MT as of October 17. In contrast, the European Cocoa Association reported a decline in European Q3 cocoa grindings, which fell 3.3% year-on-year to 354,335 MT.
Challenges for Ghana’s Cocoa Production
Ghana’s Cocoa Board (Cocobod) recently cut its cocoa production estimate for 2024/25 to 650,000 MT, down from an earlier prediction of 700,000 MT due to adverse weather and crop diseases. For the current 2023/24 season, Ghana’s harvest has plummeted to a 23-year low of 425,000 MT.
Regional Production Insights
On the other hand, Cameroon, the fifth-largest cocoa producer, saw its production increase by 1.2% year-on-year to 266,725 MT for the 2023/24 season. Additionally, Nigeria’s cocoa exports also rose by 6.8% year-on-year to 14,984 MT.
Broader Market and Stock Concerns
The International Cocoa Association (ICCO) recently updated its global cocoa deficit estimate from -439,000 MT to -462,000 MT for the 2023/24 season, marking the largest deficit in over 60 years. They also revised the production estimate down to 4.330 MMT from 4.461 MMT and projected a historic low of 27.4% for the global cocoa stocks/grindings ratio.
More Cocoa News from Barchart
On the date of publication,
Rich Asplund
did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data provided are for informational purposes only. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
