Cocoa Prices Consolidate This Week's Rally

May ICE NY cocoa (CCK23) on Friday closed down -30 (-1.08%), and May ICE London cocoa #7 (CAK23) closed down -29 (-1.35%).

Cocoa prices Friday posted moderate losses on pre-weekend position squaring and long liquidation.   On Wednesday, NY cocoa rose to a 2-year high, and London cocoa posted a 2-3/4 month high after the International Cocoa Organization (ICCO) forecasted global 2022/23 cocoa stockpiles would fall -3.5% y/y to 1.653 MMT and said, "the expectation of a supply deficit has been compounded with weather variations, especially in West Africa."  On the negative side, the ICCO forecast 2022/23 global cocoa production would climb +4.1% y/y to 5.017 MMT, and global cocoa grindings would fall -0.6% y/y to 5.027 MMT.

Smaller supplies from the Ivory Coast are supportive of cocoa prices.  Monday's government data showed that Ivory Coast farmers sent a cumulative 1.70 MMT MT of cocoa to Ivory Coast ports for the 2022/23 marketing year from October 1 through February 26, down -2.9% y/y.  The Ivory Coast is the largest cocoa producer in the world.

A decline in cocoa exports from Nigeria is also favorable for prices after the Cocoa Association of Nigeria reported Monday that Nigeria's Jan cocoa exports fell  -5.9% y/y to 43,405 MT.  Nigeria is the world's fifth-largest cocoa bean producer.

Cocoa also has support from recent reports that some Ivory Coast cocoa exporters are close to defaulting on their contracts due to a lack of cocoa beans, with some shortage estimates as high as 150,000 tons.  According to Reuters, with more cocoa grinding being done locally in the Ivory Coast, not enough cocoa beans are available to satisfy exporters' contracts.  

Concern about the quality of some West African cocoa crops has limited any declines in cocoa prices.  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.

Tighter cocoa inventories are supportive of prices.  ICE-monitored NY cocoa inventories held in U.S. ports are moderately above the 10-month low from January 3.  Also, ICE-monitored cocoa stockpiles held in EU ports fell to a 10-1/2 month low on February 13 of 112,820 MT.  

On the bearish side, Ivory Coast's cocoa regulator said last Wednesday that it would restrict some multinational traders from additional cocoa bean purchases for exports.  Le Conseil Cafe-Cacao, the Ivory Coast's cocoa regulator, said it blocked Barry Callebaut and Cargill from buying extra cocoa beans after both companies reached the amounts stipulated in their current contracts.  

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.  

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 also revised its 2021/22 global cocoa production figure downward by -419,000 MT from September.  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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