Cocoa Prices Under Pressure from Rain in West Africa

March ICE NY cocoa (CCH23) on Thursday closed down -9 (-0.35%), and March ICE London cocoa #7 (CAH23) closed down -12 (-0.59%).

Cocoa prices Thursday closed moderately lower, with London cocoa posting a 1-week low.  Cocoa prices are under pressure as recent rain in West Africa eases dry conditions caused by the seasonal Harmattan winds, improving the yield prospects of the Ivory Coast and Ghana cocoa crops.  A stronger dollar Thursday (DXY00) also weighed on most commodity prices, including cocoa.  

Cocoa prices are also weighed down on ample supplies from the Ivory Coast.  Monday's government data showed that Ivory Coast farmers sent a cumulative 1.57 MMT MT of cocoa to Ivory Coast ports for the 2022/23 marketing year from October 1 through January 29, up +7.5% y/y.  

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.

On the positive side for cocoa are smaller cocoa exports from Nigeria after the Cocoa Association of Nigeria reported last Tuesday that Nigeria's Dec cocoa exports fell -0.7% m/m and -73% y/y to 36,571 MT.  Nigeria is the world's fifth-largest cocoa bean producer.

Global cocoa demand is tepid and is a negative factor for prices.  On January 19, the National Confectioners Association reported that Q4 North American cocoa grindings fell -8.1% y/y to 107,130 MT.  Also, the European Cocoa Association reported on January 19 that European Q4 cocoa grindings fell -1.7% y/y to 359,577 MT.  On January 18, the Cocoa Association of Asia reported that Asia Q4 cocoa grindings fell -0.2% y/y to 230,806 MT.  

NY cocoa has 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 a 9-1/4 month low on January 3.  Also, ICE-monitored cocoa stockpiles held in EU ports remain at a 9-1/4 month low of 112,880 MT.

The quarterly report from the ICCO on December 1 was bullish for cocoa prices after ICCO said global 2021/22 cocoa production fell -8.0% y/y to 4.823 MMT as unfavorable weather and disease hampered cocoa yields.  ICCO revised its 2021/22 global cocoa production figure downward by -419,000 MT from the September figure.  The ICCO also raised the 2021/22 global cocoa deficit to -306,000 MT from a Sep forecast of -230,000 MT.  In 2020/21, global cocoa production rose to a record 5.242 MMT, and the global cocoa market was in a surplus of +209,000 MT.

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