Cocoa Prices Push Higher on a Weaker Dollar

December ICE NY cocoa (CCZ22) on Thursday closed up +67 (+2.89%), and December ICE London cocoa #7 (CAZ22) closed up +16 (+0.82%).

Cocoa prices Thursday erased early losses and closed moderately higher.  A reversal in the dollar sparked short-covering in cocoa futures Thursday after the dollar index retreated from a 2-week high and moved sharply lower.

On Thursday, cocoa prices initially moved lower, with NY cocoa falling to a 2-week low and London cocoa falling to a 1-week low.  There were signs of weak cocoa demand that pressured prices Thursday after the European Cocoa Association reported that European Q3 cocoa grindings fell -1.6% y/y to 369,679 MT, the first y/y decline since Q1 of 2021.  

Harvest pressures are weighing on cocoa prices as beneficial weather in West Africa has allowed cocoa farmers in the Ivory Coast and Ghana to harvest and dry beans.  The 2022/23 cocoa season began on October 1.

The Ivory Coast government reported Monday that Ivory Coast cocoa farmers sent a cumulative 21,452 MT of cocoa to Ivory Coast ports for the 2022/23 season (Oct-1-Oct 9).  

A lack of fertilizer for cocoa farmers in West Africa is supportive of prices as it risks undercutting next year's cocoa yields in the Ivory Coast and Ghana.  The war in Ukraine has limited Russian exports of potash and other fertilizers worldwide.

Smaller supplies from Nigeria, the world's fifth biggest cocoa producer, are bullish for cocoa prices after Nigeria reported on September 29 that its Aug cocoa bean exports tumbled -48% y/y to 10,823 MT.

Cocoa prices found support when the International Cocoa Organization (ICCO) on September 1 cut its 2021/22 global cocoa production estimate to 4.890 MMT from a June forecast of 4.923 MMT and raised its 2021/22 global cocoa deficit estimate to -230,000 MT from a June forecast of -174,000 MT.  In 2020/21, global cocoa production rose to a record 5.24 MMT, and in 2020/21, the global cocoa market was in a surplus of +215,000 MT.

In a bullish factor, Ghana reported on July 27 that its 2021/22 cocoa crop fell by -35% y/y to 685,000 MT, the smallest crop in 12 years, due to drought and swollen shoot virus.  Ghana is the world's second-largest cocoa producer.  However, the Ghana Cocoa Board estimates 2022/23 Ghana cocoa production will rebound +31% y/y to 850,000 MT.

Recent reports on chocolate demand have also been mixed.  Researcher IRI reported on July 14 that the volume of chocolate products sold in the U.S. dropped -1.5% y/y in the 13 weeks that ended June 12.  However, Barry Callebaut, the world's leading manufacturer of chocolate and cocoa products, reported on August 31 that its global chocolate sales grew +9.1% in the first nine months of the fiscal year 2021/22 ended May 31.  

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