Cocoa Prices Consolidate Below Monday's 11-Month High

March ICE NY cocoa (CCH23) on Wednesday closed up +29 (+1.11%), and March ICE London cocoa #7 (CAH23) closed up +26 (+1.28%).

Cocoa prices Wednesday posted moderate gains as they consolidated below Monday's highs.  On Monday, NY cocoa rallied to an 11-month nearest-futures high on concern the Harmattan winds could lead to excessive dryness that limits the flowering of cocoa trees and reduces West African cocoa yields.

Cocoa prices Tuesday gave back all of Monday's sharp advance after Ivory Coast government data showed robust cocoa supplies.  Ivory Coast government data on Tuesday showed that Ivory Coast farmers sent a cumulative 1.33 MMT MT of cocoa to Ivory Coast ports for the 2022/23 marketing year from October 1 through January 8, up +9.9% y/y.  The report eases concerns that the seasonal Harmattan winds are damaging West African cocoa crops.

Signs that cocoa demand is improving are bullish for prices.  Gepex, a cocoa exporter group of six of the world's biggest cocoa grinders, reported December 29 that Gepex Nov cocoa processing rose +5.1% y/y to 55,248 MT.

NY cocoa continues to see underlying support from tighter cocoa supplies.  ICE-monitored NY cocoa inventories held in U.S. ports have trended lower over the past four months and fell to an 8-3/4 month low last Tuesday.  Also, ICE-monitored cocoa stockpiles held in EU ports remain at a 9-month low of 112,880 MT.

An excessive long position in London cocoa futures could fuel long liquidation pressures after last Friday's weekly Commitment of Traders (COT) report showed funds boosted their net-long London cocoa positions by 3,439 the week ended January 3 to 83,119, a 7-year high.

Abundant cocoa supplies from the Ivory Coast, the world's largest cocoa producer, are bearish for prices.  

Cocoa prices have seen support from concern about the quality of some West African cocoa crops.  Cocoa farmers continue to struggle with the lack of fertilizer and pesticides as the war in Ukraine has limited Russian exports of potash and other fertilizers worldwide.

The quarterly report from the International Cocoa Organization (ICCO) on December 1 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.

Larger cocoa exports from Nigeria are bearish for prices.  News on December 22 showed that Nigeria's Nov cocoa exports jumped +130% m/m and +17% y/y to 36,819 MT.  Nigeria is the world's fifth-largest cocoa bean 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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