Cocoa Market Sees Price Increases as Demand Recovers
Cocoa futures prices rose significantly on Monday. September ICE NY cocoa (CCU24) rose +369 (+4.91%), while September ICE London #7 cocoa (CAU24) rose +260 (+4.32%). This recovery comes after a period of price decline, reaching one-month lows due to concerns about global demand and the supply scenario.
Influences on Price Recovery聽
The price recovery was driven by short-covering, mainly due to lower cocoa production in Ivory Coast, the world鈥檚 largest producer. Government data indicated that from October 1 to August 4, cocoa shipments to ports totaled 1.66 million metric tons (MMT), a 28% decrease compared to the same period last year.
Prices initially fell on concerns about global demand, especially after Hershey, the world鈥檚 fourth-largest chocolate producer, reported a quarterly drop in sales and revised its annual forecast downwards due to weakening consumer demand for chocolate.
Weather and Production聽
The outlook for the upcoming cocoa season in West Africa is also in focus. With the end of the El Ni帽o weather pattern and a possible transition to La Ni帽a, increased rainfall is expected in C么te d鈥橧voire and Ghana, which would improve soil moisture levels and potentially increase cocoa production.
However, increased rainfall also raises concerns about diseases in cocoa plantations. Farmers have struggled with the high cost of chemicals needed to combat diseases such as black pod, delaying crop spraying and allowing the disease to spread.
Impact of Exports and Stocks聽
A surge in cocoa exports from Nigeria, the world鈥檚 fifth-largest producer, has also pressured prices. In June, Nigerian exports increased by 18% year-on-year to 14,465 metric tons.聽
In the United States, cocoa stocks monitored by ICE hit a three-and-a-half-year low on Friday at 2,908,055 bags, providing support to prices due to tight supplies.
Projections and Demand
For the 2023/24 season, cocoa production in C么te d鈥橧voire is projected by Ecom Agroindustrial at 1.75 MMT, a 21.5% drop from the previous year and the lowest production in eight years. Cocoa production in Ghana is also expected to rebound to 700,000 metric tons in 2024/25, compared to 425,000 tons in 2023/24, due to improved weather conditions.
On the other hand, cocoa demand has been better than expected. Cocoa crushing in North America increased by 2.2% in the second quarter, while in Asia, the decline was smaller than expected, with a decline of just 1.4%. In Europe, crushing unexpectedly increased by 4.1% in the second quarter, against expectations of a decline.