May ICE NY cocoa (CCK23) on Thursday closed up +8 (+0.26%), and May ICE London cocoa #7 (CAK23) closed down -11 (-0.48%).
Cocoa prices Thursday settled mixed, with NY cocoa climbing to a new 6-1/2 year high. Cocoa prices have rallied sharply over the past month on signs of improved cocoa demand and tighter global supplies.
Signs of stronger global cocoa demand are bullish for prices. On Thursday, the Cocoa Association of Asia reported that Q1 Asia cocoa grindings rose +4.09% y/y to 222,028 MT. On Wednesday, Gepex, 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. Last Thursday, 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 are a bullish factor for prices. On Monday, the Ivory Coast government reported that farmers sent a cumulative 1.86 MMT of cocoa to Ivory Coast ports for the 2022/23 marketing year (October 1 through April 16), down -4.6% 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.
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.
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 900 in the week ending April 11 to a 3-year high of 52,390 long positions.
Current cocoa supplies have increased and are bearish for prices. ICE-monitored cocoa inventories held in U.S. port warehouses last Friday rose to a 3-month high of 5,402,545 bags.
An increase in cocoa exports from Nigeria is bearish for prices after the Cocoa Association of Nigeria reported on 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.
