March ICE NY cocoa (CCH25) Friday closed unchanged, and March ICE London cocoa #7 (CAH25) closed up +36 (+0.46).
Cocoa prices on Friday extended this week’s rally, with Mar NY cocoa and Mar London cocoa posting fresh contract highs. Also, nearest-futures (Z24) NY cocoa posted a 2-3/4 month high, and nearest-futures (Z24) London cocoa posted a 5-1/2 month high. Cocoa prices are soaring after weather forecaster Maxar Technologies said Wednesday that dry conditions in West Africa will hurt the early development of the mid-year cocoa crop harvested in April and that the arrival of the seasonal Harmattan winds could worsen the situation.
However, a rising dollar (DXY00) Friday sparked long liquidation in cocoa futures, and cocoa prices fell back from their best levels, with NY cocoa closing unchanged.
Shrinking global cocoa stockpiles are also bullish for prices. ICE-monitored cocoa inventories held in US ports have been trending lower for the past 1-1/2 years and fell to a 20-year low Friday of 1,496,277 bags.
Also supporting the latest leg higher in cocoa prices was the International Cocoa Association (ICCO) action last Friday to raise its 2023/24 global cocoa deficit estimate to -478,000 MT from May’s -462,000 MT, the largest deficit in over 60 years. ICCO also cut its 2023/24 cocoa production estimate to 4.380 MMT from May’s 4.461 MMT, down -13.1% y/y. ICCO projected a 2023/24 global cocoa stocks/grindings ratio of 27.0%, a 46-year low.
Heavy rain in West Africa has led to reports of high mortality rates of cocoa buds on trees and pushed cocoa prices sharply higher. Heavy rains in the Ivory Coast have also flooded fields, increased disease risk, and affected crop quality. Recently harvested cocoa beans from the Ivory Coast signal lower quality, with counts of about 105 beans per 100 grams. The Ivory Coast cocoa regulator allows exporters to buy bean counts of 80 to 100 or slightly more for every 100 grams, with the best quality cocoa having the lower count.
An increase in cocoa supplies from the Ivory Coast, the world’s largest producer, is bearish for prices. Government data Monday showed that Ivory Coast farmers shipped 734,026 MT of cocoa to ports from October 1 to December 1, up +34.6% from 545,164 MT shipped the same time last year.
Stronger cocoa exports from Nigeria, the world’s sixth-largest producer, are bearish for prices. Nigeria’s Oct cocoa exports rose +15% y/y to 20,508 MT.
On the negative side, the Ivory Coast regulator Le Conseil Cafe-Cacao on October 18 raised its Ivory Coast 2024/25 cocoa production estimate to a range of 2.1-2.2 MMT from a June forecast of 2.0 MMT.
Recent global cocoa demand news was mixed. The National Confectioners Association on October 17 reported that North American Q3 cocoa grindings rose +12% y/y to 109,264 MT. Also, the Cocoa Association of Asia reported that Q3 Asian cocoa grinding rose +2.6% y/y to 216,998 MT. However, the European Cocoa Association reported that European Q3 cocoa grindings fell -3.3% y/y to 354,335 MT.
Cocoa found support after Ghana’s Cocoa Board (Cocobod) on August 20 cut its 2024/25 Ghana cocoa production estimate to 650,000 MT from a June forecast of 700,000 MT. Due to bad weather and crop disease, Ghana’s 2023/24 coca harvest sank to a 23-year low of 425,000 MT. Ghana is the world’s second-biggest cocoa producer, and its 2024/25 cocoa harvest begins in October.
