Cocoa prices experienced a sharp decline on Wednesday, with December ICE NY cocoa (CCZ24) dropping by $327, or 4.51%, and December ICE London cocoa #7 (CAZ24) falling by £176, or 3.10%. The downturn marks a one-week low for cocoa futures.
The primary driver behind the price drop was a rally in the U.S. dollar, which surged to a four-month high, weighing on many commodity prices, including cocoa. The strength of the dollar has made cocoa more expensive for buyers using other currencies, contributing to the commodity’s slide.
Additionally, cocoa prices had already been under pressure due to a faster-than-expected harvest in the Ivory Coast, the world’s largest cocoa producer. According to recent government data, from October 1 to November 3, farmers in the Ivory Coast exported 365,072 metric tons (MT) of cocoa, a 26% increase from the 288,686 MT shipped during the same period last year. The country’s regulator, Le Conseil Café-Cacao, further fueled the bearish sentiment when it revised its 2024/25 production forecast upward to between 2.1 and 2.2 million MT, up from the previous estimate of 2.0 million MT made in June.
Despite some positive demand reports, the cocoa market remains cautious. The National Confectioners Association (NCA) reported a 12% year-over-year increase in North American cocoa grindings for the third quarter, reaching 109,264 MT. Similarly, the Cocoa Association of Asia announced a 2.6% year-over-year increase in third-quarter grindings in Asia, totaling 216,998 MT. However, European demand appears weaker, with the European Cocoa Association reporting a 3.3% year-over-year decline in cocoa grindings, totaling 354,335 MT.
On a more positive note, the global cocoa supply situation remains tight. Stocks held in U.S. ports, monitored by ICE, have been trending downward for 17 consecutive months and recently hit a 19-year low of 1,728,817 bags, a signal of tightening inventories that could support prices.
The global cocoa deficit is also a bullish factor. The International Cocoa Organization (ICCO) recently updated its 2023/24 global cocoa deficit estimate to 462,000 MT, the largest in over six decades, further straining the supply side. The ICCO also lowered its production forecast for the 2023/24 season to 4.33 million MT, down from an earlier estimate of 4.46 million MT.
While some producing nations are struggling with crop diseases and adverse weather, there is additional supply from other regions. In Ghana, the world’s second-largest cocoa producer, the Cocoa Board (Cocobod) reduced its 2024/25 production estimate to 650,000 MT, down from 700,000 MT previously, due to poor weather and crop diseases. This follows a 23-year low in Ghana’s 2023/24 cocoa harvest, which dropped to 425,000 MT. However, Cameroon, the world’s fifth-largest cocoa producer, reported a 1.2% increase in its 2023/24 production to 266,725 MT, while Nigeria saw a 6.8% rise in cocoa exports in August compared to the previous year.
Overall, the cocoa market remains a balancing act, with mixed demand signals and an uncertain supply outlook. While tightening stockpiles and a significant global deficit provide support for prices, the accelerating harvest in major cocoa-producing nations, along with a stronger dollar, continue to weigh heavily on the market.
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