May ICE NY cocoa (CCK24) Monday closed up +332 (+5.19%), and May ICE London cocoa #7 (CAK24) closed +285 (+5.45%).

May NY cocoa on Monday rallied sharply and edged to a new contract high due to ongoing West African cocoa supply concerns.  

Lower cocoa production in the Ivory Coast, the world's largest producer, is a major bullish factor for cocoa prices.  Monday's government data showed Ivory Coast farmers shipped 1.22 MMT of cocoa to ports from October 1 to March 10, down -29% from the same time last year.  The Ivory Coast cocoa regulator said last Thursday it expects the Ivory Coast mid-crop, which officially starts in April and is the smaller of two annual harvests, to fall -33% to 400,000 MT from 600,000 MT last year.

Cocoa found support when the International Cocoa Organization (ICCO) on Feb 29 projected that the global 2023/24 cocoa deficit would widen to -374,000 MT from -74,000 MT in 2022/23.  ICCO projects global cocoa production in 2023/24 will fall by -11% y/y to 4.45 MMT, and global cocoa grindings will fall by nearly -5%, which would push the 2023/24 stock-to-grindings ratio to the lowest in more than 40 years.  Aging cocoa trees, disease, and underinvestment in West African cocoa farms are undercutting cocoa production.

Smaller cocoa exports from Nigeria, the world's fifth largest cocoa producer, are bullish for prices after Nigeria's Jan cocoa exports fell -15% y/y to 36,941 MT.

On January 25, the Ivory Coast cocoa regulator, Le Conseil Cafe-Cacao, halted forward cocoa sales for the 2024/25 season.  The regulator halted forward sales until it had a clear picture of expected cocoa production in the Ivory Coast.  The halt adds to the tumult of the region's cocoa supplies, and the impact could multiply supply concerns.  Trader Ecom Agroindustrial projects Ivory Coast 2023/24 cocoa production, which ends in September, will fall -21.5% y/y to an 8-year low of 1.75 MMT.

Unfavorable growing conditions and crop disease on West African farms over the past year have curbed cocoa production and fueled a scorching rally in cocoa prices.  It has also stoked concern that current cocoa production cannot replenish supplies to avoid a global deficit.  The intense seasonal Harmattan winds and insufficient rain in West Africa are drying out cocoa fields and causing damage to the Ivory Coast mid-crop.

Also, on the bullish side, ICE-monitored cocoa inventories held in U.S. ports fell to a 2-3/4 year low of 4,100,035 bags on January 12.  However, inventories have recently recovered and climbed to a 2-1/2 month high on February 21.

Cocoa prices remain well supported by concern that an El Nino weather event could undercut global cocoa production.  Cocoa prices rallied to 12-year highs in 2016 after an El Nino weather event caused a drought that hampered global cocoa production.

Record-high cocoa prices are starting to curb global demand.  On January 12, the National Confectioners Association reported that 4Q North American cocoa grindings fell -3.0% y/y to 103,971 MT.  Also, the Cocoa Association of Asia reported that Asian Q4 cocoa grindings fell -8.5% y/y to 211,202 MT.  Finally, the European Cocoa Association reported that European Q4 cocoa grindings fell -2.5% y/y to 350,739 MT.

The International Cocoa Organization (ICCO) reported that global 2022/23 cocoa production increased +2.4% y/y to 4.938 MMT, and global cocoa grindings increased +0.2% y/y to 5.005 MMT.  ICCO estimated the end-of-season 2022/23 global cocoa stocks to be at 1.727 MMT and the cocoa stocks-to-grinding ratio to be at a 7-year low of 34.9%.  ICCO estimated the global cocoa deficit for 2022/23 at -74,000 MT.
 



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