March ICE NY cocoa (CCH25) Thursday closed down -319 (-2.95%), and March ICE London cocoa #7 (CAH25) closed down -217 (-2.48%).
Cocoa prices Thursday fell to 1-week lows and closed moderately lower on signs that high prices are causing demand destruction for cocoa. The European Cocoa Association reported Thursday that Q4 European cocoa grindings fell -5.3% y/y to 331,853 MT, the lowest in more than 4 years. Also, the Cocoa Association of Asia reported that Q4 Asian cocoa grindings fell -0.5% y/y to 210,111 MT, the lowest in 4 years.
Shrinking global cocoa stockpiles is supportive of cocoa prices. ICE-monitored cocoa inventories held in US ports have been trending lower for the past 1-1/2 years and fell to a 20-year low Tuesday of 1,300,731 bags.
Cocoa also has support on concern that slowing Ivory Coast cocoa exports will tighten global supplies. While government data Monday showed Ivory Coast farmers shipped 1.16 MMT of cocoa to ports so far this marketing year, up more than +27% from last year, the pace has narrowed from the 35% rise seen last month.
Cocoa found support last week when chocolate maker Hershey Co. said it sought CFTC approval to buy a large amount of cocoa through the ICE Futures Exchange due to tight global supplies. Bloomberg reported that Hershey wants to take a position allowing it to purchase more than 90,000 MT of cocoa on ICE Futures US. The purchase size is more than nine times what the exchange currently allows. The amount also exceeds a federal position limit of 4,900 contracts, or 49,000 MT, set by the CFTC. Global cocoa shortages are so large that it's now cheaper to take delivery of supplies through the New York exchange than buying in the physical market.
Crop production concerns in West Africa are also supporting cocoa prices after some Ivory Coast and Nigerian cocoa farmers last week reported that cocoa trees are beginning to suffer the effects of the seasonal dry and dusty Harmattan winds, with leaves turning yellow and the cherelles (cocoa pods) withering.
On December 18, NY Cocoa posted an all-time nearest-futures high, and London Cocoa posted an 8-1/2 month nearest-futures high on the deterioration of the West African cocoa mid-crop outlook. Maxar Technologies warned that dry conditions in West Africa will hurt the early development of the mid-year cocoa crop harvested in April and that the arrival of the seasonal Harmattan winds could worsen the situation.
In a bullish factor, the International Cocoa Association (ICCO) on November 22 raised its 2023/24 global cocoa deficit estimate to -478,000 MT from May's -462,000 MT, the largest deficit in over 60 years. ICCO also cut its 2023/24 cocoa production estimate to 4.380 MMT from May's 4.461 MMT, down -13.1% y/y. ICCO projected a 2023/24 global cocoa stocks/grindings ratio of 27.0%, a 46-year low.
Heavy rain in West Africa has led to reports of high mortality rates of cocoa buds on trees and pushed cocoa prices sharply higher. Heavy rain in the Ivory Coast has also flooded fields, increased disease risk, and affected crop quality. Recently harvested cocoa beans from the Ivory Coast signal lower quality, with counts of about 105 beans per 100 grams. The Ivory Coast cocoa regulator allows exporters to buy bean counts of 80 to 100 or slightly more for every 100 grams, with the best quality cocoa having the lower count.
Stronger cocoa exports from Nigeria, the world's sixth-largest producer, are also bearish for prices. Nigeria's Nov cocoa exports rose +35% y/y to 38,015 MT.
On the negative side, the Ivory Coast regulator Le Conseil Cafe-Cacao on October 18 raised its Ivory Coast 2024/25 cocoa production estimate to a range of 2.1-2.2 MMT from a June forecast of 2.0 MMT.
Cocoa found support after Ghana's Cocoa Board (Cocobod) on August 20 cut its 2024/25 Ghana cocoa production estimate 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.
