May ICE NY cocoa (CCK24) today is down -16 (-0.23%), and May ICE London cocoa #7 (CAK24) is down -51 (-0.87%).
May NY cocoa today rallied to a new contract high, but then settled back on some long liquidation pressure after Tuesday's scorching rally of +4.77%. London cocoa edged to a contract high today but then fell back after its even larger rally of +5.67% on Tuesday.
Lower cocoa production in the Ivory Coast, the world's largest producer, is a major bullish factor for cocoa prices. Monday's government data showed Ivory Coast farmers shipped 1.22 MMT of cocoa to ports from October 1 to March 10, down -29% from the same time last year. The Ivory Coast cocoa regulator said last Thursday it expects the Ivory Coast mid-crop, which officially starts in April and is the smaller of two annual harvests, to fall -33% to 400,000 MT from 600,000 MT last year. Trader Ecom Agroindustrial projects Ivory Coast 2023/24 cocoa production, which ends in September, will fall -21.5% y/y to an 8-year low of 1.75 MMT.
Also on the bullish side, ICE-monitored cocoa inventories held in U.S. ports fell to a 2-month low of 4,116,727 bags on Monday, which was just mildly above the 3-year low of 4,100,035 bags posted on January 12, 2024.
Cocoa found support when the International Cocoa Organization (ICCO) on Feb 29 projected that the global 2023/24 cocoa deficit would widen to -374,000 MT from -74,000 MT in 2022/23. ICCO projects global cocoa production in 2023/24 will fall by -11% y/y to 4.45 MMT, and global cocoa grindings will fall by nearly -5%, which would push the 2023/24 stock-to-grindings ratio to the lowest in more than 40 years.
Unfavorable growing conditions and crop disease on West African farms over the past year have curbed cocoa production and fueled a scorching rally in cocoa prices. A global cocoa deficit is expected to extend into 2023/24 since current cocoa production is insufficient to meet demand. Also, cocoa prices are seeing support from the current El Nino weather event after an El Nino event in 2016 caused a drought and a rally in cocoa prices to a 12-year high.
Smaller cocoa exports from Nigeria, the world's fifth largest cocoa producer, are bullish for prices after Nigeria's Jan cocoa exports fell -15% y/y to 36,941 MT.
On January 25, the Ivory Coast cocoa regulator, Le Conseil Cafe-Cacao, halted forward cocoa sales for the 2024/25 season. The regulator halted forward sales until it had a clear picture of expected cocoa production in the Ivory Coast. The halt adds to the tumult of the region's cocoa supplies, and the impact could multiply supply concerns.
Record-high cocoa prices are starting to curb global demand. On January 12, the National Confectioners Association reported that 4Q North American cocoa grindings fell -3.0% y/y to 103,971 MT. Also, the Cocoa Association of Asia reported that Asian Q4 cocoa grindings fell -8.5% y/y to 211,202 MT. Finally, the European Cocoa Association reported that European Q4 cocoa grindings fell -2.5% y/y to 350,739 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.
