NY Cocoa Falls as Recent Rain Should Boost West African Cocoa Yields

September ICE NY cocoa (CCU22) on Friday closed down -26 (-1.11%), and September ICE London cocoa #7 (CAU22) closed up +2 (+0.12%).

Cocoa prices on Friday settled mixed, with NY cocoa falling to an 11-1/2 month low.   Cocoa prices fell sharply this week as recent rains in West Africa should boost cocoa yields in the Ivory Coast and Ghana, the world's two biggest cocoa producers.  London cocoa Friday recovered from early losses and settled slightly higher after the British pound (^GBPUSD) fell to a 2-1/2 week low.  A weaker pound boosts cocoa priced in sterling.

Concern that rising inflation and a slowdown in the global economy will curb demand for commodities, including cocoa, is bearish for prices.  The International Cocoa Organization June 16 released a report saying that "rising inflation could restrain the consumption of non-essentials and luxury goods including cocoa products should the situation persist."  

Ample cocoa supplies from the Ivory Coast are bearish for prices after the Ivory Coast government reported Monday that Ivory Coast cocoa farmers sent a cumulative 2.27 MMT of cocoa to Ivory Coast ports from Oct 1-Jun 26, down only -1.3% y/y.

Signs of abundant cocoa supplies are bearish for prices after ICE cocoa inventories on June 9 rose to a 10-1/2 month high of 5.817 mln bags.

In a 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 Monday's data showed Nigeria's May cocoa exports fell -46% y/y to 12,497 MT.

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.

Big Picture Cocoa Market Factors: World cocoa production in 2021/22 (Oct/Sep) will fall -5.2% y/y to 4.955 MMT, and global 2021/22 cocoa grindings will rise +2.4% y/y to 5.05 MMT (ICCO).  ICCO forecasts a global 2021/22 cocoa deficit -174,000 MT from a +215,000 MT surplus in 2021/21.  The 2020/21 stocks/grindings ratio will shrink 34.3% from 38.9% in 2020/21.  Ivory Coast 2019/20 cocoa production (main crop Oct-Mar; mid-crop May-Aug) rose +1.2% y/y to 2.18 MMT, while Ghana 2019/20 cocoa production (main crop Sep-Mar; mid-crop May Aug) rose +2.3% y/y to 850,00 MMT (ICCO).

• Cocoa Prices Tumble as Rain Improves West African Cocoa Yields
• Cocoa Prices Weighed Down by Timely West African Rains
• Cocoa Prices Slide as Timely West African Rains Boost Cocoa Yields
• Cocoa Prices Slide on Ample Supplies Amid Demand Concerns