Cocoa Prices Hit New Highs Amid Supply Concerns
Market Update: March ICE NY cocoa (CCH25) rises by +229 (+2.17%), while March ICE London cocoa #7 (CAH25) increases by +204 (+2.42%).
Today, cocoa prices continued their upward trend, marking a six-week rally as both March NY cocoa and March London cocoa achieved fresh contract highs. The surge is largely driven by a worsening outlook for this year’s mid-crop in West Africa. Maxar Technologies has issued a warning that dry conditions may affect the early stages of the mid-year cocoa harvest, scheduled for April. The arrival of the seasonal Harmattan winds could exacerbate these adverse conditions.
In addition, diminishing global cocoa stockpiles are supporting rising prices. Cocoa inventories monitored by ICE at U.S. ports have been falling for the past 18 months, recently reaching a 20-year low of 1,446,597 bags.
Significant market changes were also prompted by the International Cocoa Organization (ICCO), which revised its 2023/24 global cocoa deficit estimate up to -478,000 MT from -462,000 MT, marking the largest deficit seen in over 60 years. The ICCO also lowered its cocoa production forecast for 2023/24 to 4.380 million metric tons, down 13.1% year-on-year. Furthermore, the estimated global cocoa stocks-to-grindings ratio is anticipated to hit a 46-year low at 27.0%.
Recent heavy rainfall in West Africa has resulted in high mortality rates of cocoa buds on trees, contributing to a sharp increase in cocoa prices. Flooding in the Ivory Coast has damaged cocoa fields, raised risks of disease, and negatively impacted crop quality. Recently harvested cocoa beans from the region suggest inferior quality, with about 105 beans counted per 100 grams. The Ivory Coast’s cocoa regulator permits exporters to purchase beans in the range of 80 to 100, with the best-quality cocoa typically having a lower bean count.
On the flip side, a rise in cocoa supplies from the Ivory Coast, the world’s largest producer, may put downward pressure on prices. Recent government data indicated that cocoa shipments to ports from October 1 to December 8 amounted to 819,425 MT, a 34.5% increase from 609,446 MT during the same period last year.
Nigeria, the sixth-largest cocoa producer globally, is also seeing stronger exports, with October’s cocoa exports rising by 15% year-over-year to 20,508 MT, which could further negatively impact cocoa prices.
Moreover, the Ivory Coast’s regulatory body, Le Conseil Cafe-Cacao, increased its production estimate for the 2024/25 season to a range of 2.1-2.2 million metric tons, up from a prior forecast of 2.0 million metric tons made in June.
Recent reports on global cocoa demand have been mixed. The National Confectioners Association reported a 12% year-on-year increase in North American Q3 cocoa grindings to 109,264 MT. Meanwhile, the Cocoa Association of Asia noted a modest Q3 Asian cocoa grinding increase of 2.6% year-on-year to 216,998 MT. Conversely, the European Cocoa Association reported a decline of 3.3% year-on-year in European Q3 cocoa grindings, amounting to 354,335 MT.
Support for cocoa prices further came after Ghana’s Cocoa Board (Cocobod) lowered its 2024/25 cocoa production estimate to 650,000 MT from 700,000 MT previously. Ghana, which is the second-largest cocoa producer in the world, suffered from poor weather and crop disease, resulting in a 23-year low for the 2023/24 harvest at 425,000 MT. The complete harvest for 2024/25 in Ghana is set to commence in October.
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
