Cocoa Prices Under Pressure from Demand Concerns

July ICE NY cocoa (CCN22) on Thursday closed down -3 (-0.13%), and July ICE London cocoa #7 (CAN22) closed down -26 (-1.52%).

Cocoa prices on Thursday closed lower, with London cocoa falling to a 5-week low.  Cocoa prices have been under pressure this week, with NY cocoa falling to a 10-3/4 month low Wednesday, on concern that rising inflation will curb chocolate demand.  The International Cocoa Organization on Thursday released a report that said "rising inflation could restrain the consumption of non-essentials and luxury goods including cocoa products should the situation persist."  

Signs of ample cocoa supplies are bearish for prices 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.  

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.