May ICE NY cocoa (CCK23) on Thursday closed up +48 (+1.62%), and May ICE London cocoa #7 (CAK23) closed up +27 (+1.25%).
Cocoa prices Thursday closed moderately higher, with NY cocoa posting a 2-1/3 year nearest-futures high and London cocoa posting a 6-1/3 year high. Signs of improved cocoa demand pushed prices higher Thursday after 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.
Smaller cocoa supplies from the Ivory Coast have recently sparked fund buying of cocoa futures. Ivory Coast government data Tuesday showed that farmers sent a cumulative 1.83 MMT of cocoa to Ivory Coast ports for the 2022/23 marketing year (October 1 through April 9), down -3.7% y/y. The Ivory Coast is the largest cocoa producer in the world.
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.
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 365 in the week ending April 4 to a 3-year high of 51,490 long positions.
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.
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.
Current cocoa supplies have increased and are bearish for prices. ICE-monitored cocoa inventories held in U.S. port warehouses on Wednesday rose to a 2-3/4 month high of 5,379,090 bags.
An easing of cocoa crop quality concerns in West Africa is bearish for prices. Ivory Coast and Ghana cocoa farmers recently reported cocoa bean counts of 115 per 100 grams for this year’s mid-crop, above the average of 80 to 100 per 100 grams that cocoa exporters typically look for.
An increase in cocoa exports from Nigeria is bearish for prices after the Cocoa Association of Nigeria reported March 27 that Nigeria's Feb cocoa exports rose +15% y/y to 43,405 MT. Nigeria is the world's fifth-largest cocoa bean producer.
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.
