Cocoa prices saw a moderate decline today, with December ICE NY cocoa (CCZ24) falling by 283 points, or 3.29%, and December ICE London cocoa #7 (CAZ24) dropping by 136 points, or 1.91%.
The downturn in cocoa prices comes as long liquidation pressures weigh on the market, following a shift in sentiment regarding the European Union’s proposed deforestation regulations. The Intercontinental Exchange (ICE) announced it would delay planned changes to its coffee and cocoa contracts until the end of 2025, citing uncertainty surrounding the EU’s deforestation regulations. This eased some of the concerns that had previously fueled cocoa prices. Last Friday, cocoa prices had spiked, with NY cocoa reaching a two-month high and London cocoa hitting a four-month peak, as traders worried that the EU’s new regulations could curb cocoa supply from countries where deforestation is a concern.
Additional bearish pressure for cocoa comes from increased supplies from the Ivory Coast, the world’s largest cocoa producer. Government data released revealed that cocoa shipments from the Ivory Coast totaled 548,494 metric tons (MT) from October 1 to November 17, marking a 32% increase compared to 415,523 MT during the same period last year. Moreover, Ivory Coast’s cocoa production estimate for the 2024/25 season was raised by the country’s regulator, Le Conseil Café-Cacao, from an earlier forecast of 2.0 million MT to a range of 2.1 to 2.2 million MT.
Despite these bearish factors, cocoa prices have found support in recent weeks due to adverse weather conditions in West Africa. Forecaster Maxar Technologies warned that dry and hot weather in parts of Ghana and Nigeria could impact the cocoa mid-crop, which typically begins in April. Additionally, heavy rains in the Ivory Coast have caused flooding, raising the risk of disease and affecting crop quality. Recently harvested beans from the Ivory Coast have shown signs of lower quality, with higher bean counts per 100 grams—around 105, compared to the best quality cocoa, which has a lower count of around 80 to 100.
Global cocoa stockpiles have been on the decline, offering further support for prices. ICE-monitored cocoa inventories in U.S. ports have been decreasing for the past 17 months and hit a 19-year low last Friday, with stocks at just 1,656,818 bags.
Global demand for cocoa has shown mixed signals. The National Confectioners Association reported a 12% year-over-year increase in North American cocoa grindings for Q3, reaching 109,264 MT. In Asia, cocoa grindings rose 2.6% year-over-year, totaling 216,998 MT. However, the European Cocoa Association revealed a 3.3% year-over-year decline in European cocoa grindings for Q3, which fell to 354,335 MT.
Cocoa prices were buoyed earlier this year after Ghana’s Cocoa Board (Cocobod) revised its 2024/25 cocoa production estimate downward to 650,000 MT, down from a previous forecast of 700,000 MT, due to adverse weather and crop diseases. Ghana’s 2023/24 cocoa harvest had already dropped to a 23-year low of 425,000 MT. As the world’s second-largest cocoa producer, Ghana’s harvest is closely watched, with the 2024/25 season having started in October.
On the production side, Cameroon, the world’s fifth-largest cocoa producer, reported a slight increase in production, which could put additional downward pressure on prices. Cameroon’s cocoa output rose 1.2% year-over-year to 266,725 MT for the 2023/24 season. Nigeria, the sixth-largest producer, also saw a 6.8% year-over-year increase in its August cocoa exports, reaching 14,984 MT.
In a more bullish development, the International Cocoa Organization (ICCO) raised its estimate for the 2023/24 global cocoa deficit to 462,000 MT from 439,000 MT in May, marking the largest deficit in over 60 years. The ICCO also revised its global production estimate downward to 4.33 million MT, from 4.46 million MT in May, while projecting the lowest global cocoa stocks-to-grindings ratio in 46 years, at 27.4%.
Despite these mixed factors, the cocoa market remains in a delicate balance as supply increases from major producers, but adverse weather conditions and shrinking global stockpiles continue to provide upward price support.
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