NY Cocoa Gains as ICCO Cuts Global 2021/22 Cocoa Production

March ICE NY cocoa (CCH23) on Thursday closed up +21 (+0.84%), and March ICE London cocoa #7 (CAH23) closed down -18 (-0.90%).

Cocoa prices Thursday settled mixed, with NY cocoa posting a 2-week high.  A slump in the dollar index (DXY00) Thursday to a 3-1/2 month low boosted NY cocoa.  However, a rally in the British Pound (^GBPUSD) to a 5-month high pressured London cocoa prices.  

Thursday's quarterly report from the International Cocoa Organization (ICCO) was bullish for cocoa prices after ICCO said global 2021/22 cocoa production fell -6.8% y/y to 4.89 MMT as unfavorable weather and disease hampered cocoa yields.  ICCO revised its 2021/22 global cocoa production figure downward by -67,000 MT from the September figure.

Concerns about smaller global cocoa supplies are supporting prices.  Tuesday's news showed that Nigeria's Oct cocoa exports fell -21.5% y/y to 16,013 MT.  Nigeria is the world's fifth-largest cocoa bean producer.

Another bullish factor for cocoa prices was Monday's news that Ivory Coast farmers sent a cumulative 707,200 MT of cocoa to Ivory Coast ports for the 2022/23 marketing year from October 1 through November 27, down -2.6% y/y.  

Cocoa prices have underlying support from a strike by dock workers in the Ivory Coast port of San Pedro, which could spread to other Ivory Coast ports, thus reducing global cocoa supplies.  The strike has already disrupted the transportation of cocoa supplies from farms to ports in the Ivory Coast.

Another risk to global cocoa supplies is the standoff between the Ivory Coast cocoa regulator and the world's major cocoa buyers after a government-imposed premium made Ivory Coast cocoa supplies less competitive in the global market, which resulted in fewer forward-sales contracts.  As a result, the Ivory Coast regulator has threatened to prevent traders from buying cocoa from farmers if those forward sales don't resume.

An excessively large long position in London cocoa by commodity funds could fuel some long liquidation pressures.  Last Friday's weekly Commitment of Traders (COT) report showed funds boosted their net-long London cocoa positions by 1,122 to a 3-year high of 75,683 long positions in the week ended November 15.

Cocoa prices have been supported by reports that the rainy season recently caused an outbreak of black pod disease in some west-African growing areas.  In addition, cocoa farmers continue to struggle with the lack of fertilizer and pesticides.  The war in Ukraine has limited Russian exports of potash and other fertilizers worldwide.

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.

Recent global cocoa demand has been mixed.  The National Confectioners Association October 20 reported North American Q3 cocoa grindings fell -3.4% y/y to 119,244 MT.  Also, the European Cocoa Association on October 13 reported that European Q3 cocoa grindings fell -1.6% y/y to 369,679 MT, the first y/y decline since Q1 of 2021.  Conversely, the Cocoa Association of Asia said Asia Q3 cocoa grindings rose +9.5% y/y to 231,080 MT.  Also, exporter group Gepex, which includes six of the world's biggest cocoa grinding companies, reported Q3 Ivory Coast cocoa grindings rose +18.1% y/y to 171.540 MT.

Cocoa prices found support when the ICCO on September 1 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.
 

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