Sep ICE NY cocoa (CCU23) on Thursday closed down -77 (-2.31%), and Sep ICE London cocoa #7 (CAU23) closed down -43 (-1.66%).
Sep NY cocoa prices on Thursday fell back from Wednesday's contract high, when the front-month July contract posted a new 7-1/2 year high on the nearest-futures chart. Cocoa prices on Thursday fell back on long liquidation pressure and a +0.4% rally in the dollar index.
Cocoa prices rallied to Wednesday's 7-1/2 year high on El Nino concerns and the recent heavy rain in West Africa that damaged crops and slowed down the mid-crop harvest and truck shipments in the Ivory Coast. Ivory Coast farmers shipped 29,910 tons of cocoa to ports for June 19-25, up +16% y/y.
On Monday, the Ivory Coast government reported that farmers sent a cumulative 2.22 MMT of cocoa to Ivory Coast ports for the 2022/23 marketing year (October 1 through June 18), down -2.2% y/y. The Ivory Coast is the largest cocoa producer in the world.
Larger cocoa supplies from Nigeria are bearish for cocoa prices after the June 27 news that Nigeria's May cocoa exports rose +65% y/y to 20,675 tons. Nigeria is the world's fifth-largest cocoa bean producer.
Cocoa prices have support from concern that an El Nino weather event could undercut global cocoa production. On June 8, the U.S. Climate Prediction Center said that sea surface temperatures across the equatorial Pacific Ocean had risen 0.5 degrees Celsius above normal, and wind patterns have changed to the point where El Nino criteria have been met. Cocoa prices rallied to 12-year highs in 2016 after an El Nino weather event caused a drought that hampered global cocoa production.
Signs of stronger global cocoa demand are bullish for prices. On April 21, the National Confectioners Association reported Q1 North American cocoa grindings rose +2.4% m/m but fell -4.4% y/y to 109,666 MT. On April 20, the Cocoa Association of Asia reported that Q1 Asia cocoa grindings rose +4.09% y/y to 222,028 MT. On April 13, the European Cocoa Association reported that European Q1 cocoa grindings rose +0.5% y/y to 375,375 MT, the highest for a Q1 since 1999. On April 19, a cocoa exporter group that includes six of the world's biggest cocoa grinders reported that its Q1 cocoa processing jumped +22% y/y to 189,405 MT.
The International Cocoa Organization (ICCO) is forecasting a global cocoa deficit for 2022/23 of 146,000 tons. ICCO said, "The expectation of a supply deficit has been compounded with weather variations, especially in West Africa."
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.
