Cocoa Closes Moderately Higher on Demand Optimism

July ICE NY cocoa (CCN22) on Monday closed up +37 (+1.44%), and July ICE London cocoa #7 (CAN22) did not trade Monday with markets in the UK closed for the May Day holiday.

Cocoa prices Monday climbed to a 1-week high and settled moderately higher.  Signs of stronger North American demand for chocolate are bullish for cocoa prices.  Hershey, the largest chocolate producer in North America, reported last Thursday that Q1 North American confectionary sales of $2.22 billion, stronger than the consensus of $2.07 billion, and raised its full-year net sales growth forecast to up 10%-12% from a prior forecast of up 8%-10%.

Last Tuesday, NY cocoa posted a 3-3/4 month low, and London cocoa dropped to a 1-month low.  Cocoa prices were under pressure on demand concerns after the North American Confectioners Association reported on Apr 22 that Q1 North American cocoa grindings fell -2.8% y/y to 114,694 MT.  Also, the Cocoa Association of Asia reported Asian Q1 cocoa grindings fell -0.25% y/y to 213,313 MT.

Signs of ample cocoa supplies from the Ivory Coast are bearish for prices after the Ivory Coast government last Monday reported that Ivory Coast cocoa farmers sent a cumulative 1.99 MMT of cocoa to Ivory Coast ports from Oct 1-April 24, up +1.0% y/y.

An increase in ICE U.S. cocoa inventories is bearish for prices after ICE cocoa inventories last Monday rose to a 4-3/4 month high of 5.057 mln bags.

Increased cocoa supplies from Nigeria, the world's fourth-largest cocoa producer, are bearish for prices after data last Wednesday showed Nigeria's Mar cocoa exports rose +31.4% y/y to 28,149 MT.

The outlook for bigger cocoa production in Cameroon, the world's fifth-largest cocoa producer, is negative for cocoa prices after the director-general of the Cocoa Development Corp on Apr 13 projected that Cameroon's 2021/22 cocoa production would climb +20% y/y to 350,400 MT.

The European Cocoa Association reported Apr 14 that Q1 European cocoa grindings rose +4.4% y/y to 373,498 tons, the most in more than a decade.

On Feb 28, the International Cocoa Organization (ICCO) projected that global 2021/22 cocoa production would fall -by 5.2% y/y to 4.955 MMT from a record 5.226 MMT in 2020/21.  ICCO also estimates the global 2021/22 cocoa market will fall into a deficit of -181,000 MT from a surplus of +215,000 in 2020/21.