December ICE NY cocoa (CCZ24) today is down -373 (-5.13%), and December ICE London cocoa #7 (CAZ24) is down -187 (-3.61%).
Cocoa prices today are sharply lower for a second day, with NY cocoa posting a 3-1/2 week low and London cocoa posting a 6-1/2 month low. Rain in West Africa has boosted the prospects for the region's cocoa crops and is hammering cocoa prices.
Cocoa prices are also undercut by last Wednesday's news that Nigeria's July cocoa exports jumped +31% y/y to 17,456 MT. Nigeria is the world's sixth-largest cocoa producer.
Last Monday, NY cocoa rallied to a 2-1/4 month high due to concern that excessively dry conditions in West Africa could curb the region's cocoa production. Forecaster Maxar Technologies said last week 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.
Lower cocoa production in the Ivory Coast, the world's largest producer, is bullish for cocoa prices. Government data Monday showed that Ivory Coast farmers shipped 1.70 MMT of cocoa to ports from October 1 to September 1, down by -28% from the same time last year.
In a bullish factor, the International Cocoa Association (ICCO) raised its 2023/24 global cocoa deficit last Friday to -462,000 MT from a May forecast of -439,000 MT. The ICO also cut its 2023/24 cocoa production estimate to 4.330 MMT from a May estimate of 4.461 MMT. In addition, ICCO projects a 2023/24 global cocoa stocks/grindings ratio of a 46-year low of 27.4%.
Tighter US cocoa supplies are also supportive of prices. ICE-monitored cocoa inventories held in US ports fell to a 15-year low Tuesday of 2,462,938 bags.
Cocoa also has support after Ghana's Cocoa Board (Cocobod) cut its 2024/25 Ghana cocoa production estimate on August 20 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.
Trader Ecom Agroindustrial projects Ivory Coast cocoa production in the 2023/24 marketing year, which ends in September, will fall -21.5% y/y to an 8-year low of 1.75 MMT.
Cocoa prices have been supported by better-than-expected cocoa demand. 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.
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.
