Cocoa prices have surged dramatically, with New York cocoa reaching a 2-1/2 month high and London cocoa soaring to a 4-1/4 month peak. The recent spike is attributed to adverse weather in West Africa, particularly in the Ivory Coast, and global supply constraints, signalling turbulent times for the cocoa industry.
Heavy Rains in Ivory Coast Wreak Havoc on Cocoa Crops
Unprecedented heavy rainfall in the Ivory Coast, the world’s leading cocoa producer, has devastated cocoa farms, leading to high mortality rates of cocoa buds. The rains have flooded fields, heightened the risk of disease, and significantly impacted crop quality. Recent bean counts from the region show about 105 beans per 100 grams, far above the optimal range of 80–100 beans per 100 grams required for premium cocoa.
Exporters are now grappling with the challenge of sourcing high-quality cocoa, with reports suggesting declining standards due to the inclement weather.
Shrinking Global Cocoa Stockpiles Fuel Price Rally
Global cocoa stockpiles have been dwindling steadily, with ICE-monitored cocoa inventories in US ports dropping to a 19-year low of 1,601,590 bags as of last Thursday. This decline sustained over the past 17 months, has tightened supply and contributed to bullish price movements.
Adding to this, Ghana’s Cocobod recently slashed its 2024/25 cocoa production forecast to 650,000 metric tonnes, down from an earlier estimate of 700,000 MT. The country’s 2023/24 harvest, already affected by poor weather and crop diseases, plummeted to a 23-year low of 425,000 MT. Ghana, the world’s second-largest cocoa producer, has struggled to recover from these setbacks.
British Pound Drop Spurs London Cocoa Gains
In London, cocoa prices saw accelerated gains after the British pound fell to a 6-1/2 month low. A weaker pound makes cocoa, priced in sterling, more attractive to buyers, further driving demand.
Mixed Signals from Global Cocoa Producers
While the Ivory Coast has shipped 32% more cocoa to ports this season compared to last year, with farmers delivering 548,494 MT from October 1 to November 17, this increased output has done little to ease soaring prices. The country’s 2024/25 cocoa production forecast was raised to 2.1–2.2 MMT in October, up from 2.0 MMT earlier, underscoring its dominant role in global supply.
Cameroon and Nigeria have also reported increased production, with Cameroon’s output rising by 1.2% year-on-year to 266,725 MT and Nigeria’s August exports up by 6.8%. However, these gains have been overshadowed by global deficits and supply chain constraints.
Demand Dynamics: A Tale of Three Continents
Global cocoa demand presents a mixed picture. North American and Asian markets reported increases in cocoa grindings, a measure of chocolate production, with Q3 grindings up 12% year-on-year in North America and 2.6% in Asia. Conversely, Europe, the world’s largest cocoa processing region, saw a decline of 3.3% in the same period.
Historic Deficits Loom Over Cocoa Market
The International Cocoa Association (ICCO) has forecast a 2023/24 global cocoa deficit of -462,000 MT, the largest in over six decades. The ICCO also cut its global cocoa production estimate to 4.330 MMT, down from 4.461 MMT. With stock-to-grinding ratios at a 46-year low of 27.4%, the market faces significant pressure.
The Road Ahead for Cocoa Prices
As cocoa prices continue their upward trajectory, stakeholders are bracing for tighter supply and higher costs. The combination of adverse weather, supply chain disruptions, and fluctuating currency values paints a challenging picture for both producers and consumers in the months ahead.
This price rally serves as a wake-up call for major cocoa-producing nations to address vulnerabilities in their agricultural practices and invest in climate resilience to safeguard the future of this critical commodity.
About The Author
