December ICE NY cocoa (CCZ24) today is up +53 (+0.75%), and December ICE London cocoa #7 (CAZ24) is up +64 (+1.27%).

Cocoa prices today recovered from early losses and are moderately higher as tighter cocoa stockpiles sparked short covering in cocoa futures.  ICE-monitored cocoa inventories held in US ports have been trending lower for the past 15 months and fell to a 15-year low Thursday of 2,046,850 bags.

London cocoa also garnered support from weakness in the British pound (^GBPUSD), which tumbled to a 3-week low today.  The weaker pound boosts cocoa priced in sterling.  

Cocoa prices today initially moved lower, with NY cocoa sliding to a 4-1/2 month nearest-futures low on negative carryover from Wednesday when the European Commission postponed an anti-deforestation law for one year.  The legislation, scheduled to go into effect December 30, is aimed at curbing forest clearance in countries that send products, including cocoa, to the EU.  The postponement of the law allows certified cocoa stockpiles held at European warehouses to be used to satisfy contracts, reducing concerns that the new law would lead to the decertification of the cocoa and limiting existing cocoa supplies.

Lower cocoa production in the Ivory Coast, the world's largest producer, supports cocoa prices.  Government data Monday showed that Ivory Coast farmers shipped 1.76 MMT of cocoa to ports from October 1 to September 29, down by -25% from the same time last year.

Cocoa prices found support when the Ghana government on September 11 raised the price that its cocoa regulator pays farmers for cocoa by 45% to $3,063 per ton for the 2024/25 season that began this month.  The price increase was below expectations of 65%, which may prompt Ghana's cocoa farmers to hoard beans in the hopes of even higher prices.

NY cocoa in late September rallied to a 3-month high due to concern that excessively dry conditions in West Africa could curb the region's cocoa production.  Forecaster Maxar Technologies recently said that top cocoa-producing countries Ivory Coast and Ghana had seen a "significant decrease in shower activity" over the past month, leading to below-normal soil moisture and limited crop growth.

Cocoa also had 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.

An increase in cocoa production by Cameroon, the world's fifth-largest cocoa producer, is bearish for cocoa prices.  On August 21, Cameroon's National Cocoa and Coffee Board reported that 2023/24 (Aug/July) Cameroon cocoa production rose +1.2% y/y to 266,725.  Also, last Wednesday's news showed Nigeria's August cocoa exports rose by +6.8% y/y to 14,984 MT.  Nigeria is the world's sixth-largest cocoa producer.

Cocoa prices were supported by better-than-expected cocoa demand in Q2, although demand may have faded in Q3.  The National Confectioners Association reported on July 18 that North America Q2 cocoa grindings rose +2.2% y/y to 104,781 MT, stronger than estimates for a slight decline.  Also, the Cocoa Association of Asia reported on July 18 that Asian Q2 cocoa grindings fell -1.4% y/y to 210,958 MT, a smaller decline than expectations of -2.0% y/y.  The European Cocoa Association reported on July 11 that Q2 European cocoa grindings unexpectedly rose +4.1% y/y to 357,502 MT, versus expectations of a -2% y/y decline.  

In a bullish factor, the International Cocoa Association (ICCO) on August 30 raised its 2023/24 global cocoa deficit estimate to -462,000 MT from May's -439,000 MT, the largest deficit in over 60 years.  ICCO also cut its 2023/24 cocoa production estimate to 4.330 MMT from May's 4.461 MMT.  ICCO projected a 2023/24 global cocoa stocks/grindings ratio of a 46-year low of 27.4%.
 



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