
Dec ICE NY cocoa (CCZ21) on Tuesday closed down -51 (-1.95%), and Dec ICE London cocoa #7 (CAZ21) closed down -33 (-1.82%).
Cocoa prices on Tuesday settled moderately lower, with NY cocoa at a 2-month nearest-futures low and London cocoa at a 3-week low. Cocoa prices have been undercut by weaker-than-expected demand. Last Friday, Q3 Asian cocoa grindings rose +4.1% y/y to 210,970 MT, below expectations of +5.5% y/y. Last Thursday, the North American Confectioners Association reported Q3 North American cocoa grindings rose +4.3% y/y to 123,399 MT, below expectations of +6.6% y/y. Conversely, the European Cocoa Association reported last Wednesday that European Q3 cocoa processing rose +8.7% y/y to 375,811 MT, above the consensus of +5.8% y/y.
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.
Funds have a large long position in London cocoa futures that raises the risk of long liquidation pressure. Last Friday's weekly Commitment of Traders (COT) data showed that funds in the week ended Oct 12 increased their net-long London cocoa futures positions by +2,985 to a 19-month high of 54,129 positions.
Cocoa supplies are robust from Ghana, the world's second-largest cocoa producer, after the Ghana Cocoa Board reported that it purchased a record 1.05 MMT of cocoa from farmers in the season of Oct 1 to Sep 30. In addition, data on Sep 27 from Nigeria, the world's fifth-largest cocoa producer, was bearish for prices after Nigeria Aug cocoa exports surged more than +700% y/y to 20,873 MT.
Tighter cocoa supplies are supportive of prices after ICE-monitored U.S. cocoa inventories on Tuesday fell to a 5-month low, down from the record high of 5.86 mln bags (data from 1999) posted on June 30. Also, ICE-monitored EU cocoa inventories fell to an 8-month low last Tuesday.
On Oct 4, NY cocoa rallied to a 10-1/4 month high, and London cocoa climbed to a 7-1/4 month high on demand optimism and tighter supplies. An easing of the pandemic should allow more of the economy to reopen, which is positive for cocoa demand. The 7-day average of new U.S. Covid infections fell to a 2-1/2 month low Sunday of 84,798.
News of smaller cocoa supplies was bullish after the lvory Coast government reported Tuesday that Ivory Coast farmers sent 185,956 MT of cumulative cocoa to Ivory Coast ports during Oct 1-17, down -14.9% from the same time last year.
The outlook for a smaller cocoa crop in Ghana is supportive for prices after the Ghana Cocoa Board on Oct 6 projected a Ghana 2021/22 cocoa harvest of 950,000 MT, down -5.6% y/y from 1.06 MMT projected for the 2020/21 crop.