Cocoa Prices Surge Amid Supply Concerns
March ICE NY cocoa (CCH25) today is up +257 (+2.86%), and December ICE London cocoa #7 (CAZ24) is up +185 (+2.41%).
Weather Woes Impact Cocoa Supply
Cocoa prices are climbing today due to uncertainties about future supplies. Last Friday, NY cocoa reached a 2-1/2 month high, while London cocoa hit a 4-1/4 month high. Recent heavy rains in the Ivory Coast have caused concerns, leading to reports of high mortality rates of cocoa buds on trees.
Quality Declines from Adverse Conditions
Challenging weather in West Africa has driven cocoa prices up sharply. The heavy rains in the Ivory Coast have flooded fields, raised the risk of disease, and compromised crop quality. Recently harvested cocoa beans indicate lower quality, with an average count of about 105 beans per 100 grams. The Ivory Coast cocoa regulator allows exporters to buy bean counts ranging from 80 to slightly over 100 per 100 grams, with the best quality having lower counts.
Stockpiles Decrease, Affecting Prices
Shrinking global cocoa stockpiles are contributing to rising prices. ICE-monitored cocoa inventories in U.S. ports have been steadily declining for the past 1-1/2 years and recently fell to a 19-year low of 1,585,101 bags.
Ivory Coast Production Increases
A boost in supplies from the Ivory Coast, the world’s largest cocoa producer, could put downward pressure on prices. Government data released on Monday indicated that farmers shipped 642,500 MT of cocoa to ports from October 1 to November 24, marking a 34% increase from 415,523 MT during the same period last year. Additionally, the Ivory Coast regulator, Le Conseil Cafe-Cacao, on October 18 raised its production estimate for 2024/25 to a range of 2.1-2.2 MMT, up from June’s forecast of 2.0 MMT.
Mixed Global Cocoa Demand Signals
Recent news about global cocoa demand has been mixed. The National Confectioners Association reported 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 noted that Q3 Asian cocoa grindings went up by 2.6% year-on-year to 216,998 MT. However, European Q3 cocoa grindings fell by 3.3% year-on-year to 354,335 MT, as reported by the European Cocoa Association.
Impact of Ghana’s Production Outlook
Cocoa prices also found support after Ghana’s Cocoa Board (Cocobod) cut its 2024/25 production estimate to 650,000 MT from a previous forecast of 700,000 MT on August 20. This was due to adverse weather and crop diseases, which led to Ghana’s 2023/24 cocoa harvest declining to a 23-year low of 425,000 MT. As the second-largest cocoa producer globally, Ghana is crucial in the cocoa market, with its 2024/25 harvest commencing in October.
Global Cocoa Deficit Worsens
In another bullish sign, the International Cocoa Association (ICCO) on August 30 increased its 2023/24 global cocoa deficit estimate to -462,000 MT from May’s estimate of -439,000 MT, marking the largest deficit in over 60 years. The ICCO also revised its 2023/24 production estimate down to 4.330 MMT from May’s 4.461 MMT, projecting a cocoa stock-to-grindings ratio at a 46-year low of 27.4%.
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 are solely for informational purposes. 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.
