July ICE NY cocoa (CCN23) on Wednesday closed down -21 (-0.73%), and July ICE London cocoa #7 (CAK23) closed down -23 (-1.04%).
Cocoa prices Wednesday added to Tuesday's losses and posted 3-week lows. An increase in cocoa inventories is negative for prices after ICE-monitored cocoa inventories held in U.S. port warehouses rose to a 3-1/2 month high of 5,486,158 bags on Tuesday. Also, ICE-monitored cocoa inventories held in European port warehouses rose to a 7-1/2 month high Monday of 139,840 MT.
An excessive long position in NY cocoa futures could fuel long liquidation pressures after last Friday's weekly Commitment of Traders (COT) data showed funds boosted their net-long positions of NY cocoa futures by 7 in the week ending April 25 to a 3-year high of 53,483 long positions.
A record-long position in London cocoa futures could fuel long liquidation pressures after last Friday's weekly Commitment of Traders (COT) data showed funds boosted their net-long positions of London cocoa futures by 3,275 in the week ending April 25 to a record high of 98,335 long positions (data from 2011).
On April 21, NY cocoa posted a 6-3/4 year high, and London cocoa posted a 6-1/2 month high. Cocoa prices have rallied sharply over the past six weeks on signs of improved cocoa demand and tighter global supplies.
Smaller cocoa supplies from the Ivory Coast are bullish for prices after the Ivory Coast government reported Tuesday that farmers sent a cumulative 1.93 MMT of cocoa to Ivory Coast ports for the 2022/23 marketing year (October 1 through April 30), down -4.9% y/y. The Ivory Coast is the largest cocoa producer in the world.
A decline in cocoa exports from Nigeria is bullish for prices after the Cocoa Association of Nigeria reported last Thursday that Nigeria's Mar cocoa exports fell -42% m/m and -34% y/y to 18,656 MT. Nigeria is the world's fifth-largest cocoa bean producer.
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.
On March 31, the Ivory Coast Agriculture Minister said that the Ivory Coast mid-crop, the smaller of the country's two annual harvests that began April 1, is expected to fall -25% y/y to 450,000 MT.
Concern about the quality of some West African cocoa crops has limited any declines in cocoa prices. Cocoa farmers continue to struggle with the lack of fertilizer and pesticides as the war in Ukraine has limited Russian exports of potash and other fertilizers worldwide.
The monthly report from the International Cocoa Organization (ICCO) on March 24 was also supportive for prices as the report said cocoa exports from the Ivory Coast fell -9.3% y/y to 530,314 MT between October and January, citing "the detrimental effects of cocoa-related diseases like the Cocoa Swollen Shoot Virus Disease."
Cocoa prices have support from projections last month from the ICCO that global 2022/23 cocoa stockpiles would fall -3.5% y/y to 1.653 MMT. In addition, ICCO said, "The expectation of a supply deficit has been compounded with weather variations, especially in West Africa." On the bearish side, the ICCO forecast 2022/23 global cocoa production would climb +4.1% y/y to 5.017 MMT, and global cocoa grindings would fall -0.6% y/y to 5.027 MMT.
The quarterly report from the ICCO on December 1 was bullish for cocoa prices after ICCO said global 2021/22 cocoa production fell -8.0% y/y to 4.823 MMT as unfavorable weather and disease hampered cocoa yields. ICCO also revised its 2021/22 global cocoa production figure downward by -419,000 MT from September. ICCO also raised the 2021/22 global cocoa deficit to -306,000 MT from a Sep forecast of -230,000 MT. In 2020/21, global cocoa production rose to a record 5.242 MMT, and the global cocoa market was in a surplus of +209,000 MT.
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.
