NY Cocoa Closes Higher on Dryness in Nigeria

July ICE NY cocoa (CCN22) on Wednesday closed up +6 (+0.26%), and July ICE London cocoa #7 (CAN22) closed unchanged.

Cocoa prices on Wednesday settled mixed.  NY cocoa recovered from a 10-3/4 month low Wednesday and closed slightly higher after the Cocoa Farmers Association of Nigeria said that prolonged dry weather in Nigeria, the world's fourth-largest cocoa producer,  could cause farmers to lose 10% of the 2022/23 cocoa crop.

NY cocoa Wednesday initially fell to a 10-3/4 month low on signs of ample supplies after ICE cocoa inventories last Thursday rose to a 10-1/2 month high of 5.817 mln bags.

In a bullish factor, the Ivory Coast government reported Monday that Ivory Coast cocoa farmers sent a cumulative 2.218 MMT of cocoa to Ivory Coast ports from Oct 1-Jun 12, down -1.8% y/y.

In another bullish factor, the International Cocoa Organization (ICCO) on June 1 said that weather conditions and disease are negatively affecting cocoa production this year.  Also, trade disruptions and high freight rates are impacting the cocoa and fertilizer trade.  ICCO said the shortage of fertilizers on cocoa farms would likely hurt cocoa bean crop quantity, quality, and size next year.

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.

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.  

As a supportive factor, cocoa processing demand improved in April.  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.