Cocoa Prices Mixed on Concern about Ivory Coast Crop Quality

July ICE NY cocoa (CCN22) on Monday closed up +19 (+0.77%), and July ICE London cocoa #7 (CAN22) closed own -19 (-1.07%).

Cocoa prices Monday settled mixed, as London cocoa reopened after UK markets were closed last Thursday and Friday for a holiday.  

Cocoa prices last Thursday posted a 1-month high on cocoa quality concerns.  The International Cocoa Organization (ICCO) said last Wednesday that weather conditions and disease are negatively affecting cocoa production this year.  Also, trade disruptions and high freight rates are affecting the cocoa and fertilizer trade.  The ICCO said the shortage of fertilizers on cocoa farms would likely hurt the quantity, quality, and size of cocoa bean crops next year.

Signs of ample supplies are bearish for prices after ICE cocoa inventories last Friday rose to a 7-3/4 month high of 5.422 mln bags.

Smaller cocoa supplies from the Ivory Coast support prices after the  Ivory Coast government reported last Monday that Ivory Coast cocoa farmers sent a cumulative 2.15 MMT of cocoa to Ivory Coast ports from Oct 1-May 29, down -1.8% y/y.

Late last month, NY cocoa dropped to a 6-1/4 month low, and London fell to a 1-month low, on signs that higher chocolate prices are curbing demand.  Data from market researcher IRI shows U.S. chocolate sales in the 13-week period ending May 15 fell -6.3% y/y, while prices rose +11% y/y.

The prospect of bumper cocoa crops this year in West Africa is a bearish factor for prices.  Cocoa farmers in the Ivory Coast and Ghana, the world's two largest cocoa producers, have reported favorable weather conditions that should boost cocoa yields.

A decline in cocoa supplies from Nigeria, the world's fourth-largest cocoa producer, is supportive of cocoa prices after May 26 data showed Nigeria's Apr cocoa exports fell -61% y/y to 12,497 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.

Demand concerns are weighing on cocoa prices 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.  On the supportive side, however, 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.

Cocoa prices have support on signs of stronger global cocoa demand.  Gepex, a cocoa exporter group that includes six of the world's biggest cocoa grinders, reported May 11 that the group processed 49,148 MT of cocoa in April, up +16.3% y/y.  

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.