December ICE NY cocoa (CCZ24) Friday closed down -78 (-1.09%), and December ICE London cocoa #7 (CAZ24) closed up +7 (+0.13%).
Cocoa prices Friday gave up an early advance and settled mixed. Cocoa prices fell back from their best levels Friday, with NY cocoa falling into negative territory after the dollar index rebounded from a 1-week low to higher on the day, which sparked long liquidation in cocoa futures. Cocoa prices on Friday initially moved higher on signs of tighter cocoa supplies as ICE-monitored cocoa inventories held in US ports have been trending lower for the past 15 months and fell to a 15-year low on Friday of 2,391,414 bags.
On Wednesday, NY cocoa fell to a 4-week low, and London cocoa dropped to a 6-1/2 month low as rain in West Africa has boosted the prospects for the region's cocoa crops and hammered cocoa prices.
Cocoa prices were 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.
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.
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.
In a bullish factor, the International Cocoa Association (ICCO) on Aug 30 raised its 2023/24 global cocoa deficit to -462,000 MT from a May forecast of -439,000 MT. ICCO 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%.
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.
