Cocoa Prices Close Higher on Solid Global Cocoa Demand

Dec ICE NY cocoa (CCZ21) on Tuesday closed up +19 (+0.72%), and Dec ICE London cocoa #7 (CAZ21) closed up +5 (+0.28%).

Cocoa prices on Tuesday settled moderately higher as they added to Monday's gains.  Signs of strength in global cocoa demand are bullish for prices after Gepex, an exporter group that includes six of the world's biggest cocoa grinders, reported Monday that Gepex Aug cocoa processing rose +22.4% y/y to 54,459 MT.  

Signs of ample supplies are negative for cocoa prices after the lvory Coast government reported Monday that Ivory Coast farmers sent 2.44 MMT of cumulative cocoa to Ivory Coast ports during Oct 1-Sep 12, up +6.6% y/y.  Also, cocoa supplies are robust from Ghana, the world's second-largest cocoa producer, after the Ghana Cocoa Board reported Sep 2 that it purchased 1.03 MMT of cocoa from farmers in the season of Oct 1 to Aug 19, the most in a decade.

An excessive long position of London cocoa futures from funds may fuel long liquidation pressures after last Friday's weekly COT data showed funds in the week ended Sep 7 boosted their long London cocoa futures positions by +6,915 to a 5-month high of 29,425.

On Aug 31, the International Cocoa Organization (ICCO) raised its global 2020/21 cocoa production estimate to a record 5.14 MMT from a previous estimate of 5.02 MMT and raised its global 2020/21 cocoa surplus estimate to 230,000 MT from a previous estimate of 165,000 MT.

Last Wednesday, Dec NY cocoa rallied to a contract high and nearest-futures (U21) posted a 6-month high.  Signs of stronger chocolate demand are supportive of cocoa demand and prices after IRI reported Sep 3 that U.S. retail sales of chocolate confections in the four weeks through Aug 8 rose +6.3% y/y.

Tighter U.S. cocoa supplies are supportive for prices after ICE-monitored U.S. cocoa inventories on Friday fell to a 3-1/4 month low, down from the record high of 5.86 mln bags (data from 1999) posted on June 30.

Cocoa prices continue to be undercut by concern that the spread of the Covid delta variant worldwide will reduce economic activity and demand for commodities, including cocoa.  The Delta variant has forced renewed lockdowns across parts of Asia and Australia.  The 7-day average of new U.S. Covid infections rose to a 7-1/2 month high Monday of 171,850.

Global cocoa demand has improved and is a positive factor for prices.  The Cocoa Association of Asia reported July 16 that Asia Q2 cocoa grindings rose +9% y/y to 220,865 MT, stronger than expectations of +4% and a record increase for a Q2.  The National Confectioners Association reported that North American Q1 cocoa grindings rose +11.7% y/y to 123,719 MT, stronger than expectations of a +6% y/y increase.  The European Cocoa Association reported July 13 that European Q2 cocoa processing rose +14% y/y to 356,854 MT, well above the consensus of +7.5% y/y and the largest Q2 increase in over ten years.