Cocoa Climbs as Heavy Ivory Coast Rain Keeps Farmers from Transporting Cocoa

September ICE NY cocoa (CCU22) on Wednesday closed up +41 (+1.77%), and September ICE London cocoa #7 (CAU22) closed up +35 (+2.03%).

Cocoa prices Wednesday rose moderately, with London cocoa posting a 1-week high.  Short-covering in cocoa futures emerged Wednesday after reports said that heavy rain in the Ivory Coast limited farmers' access to plantations to transport harvested cocoa beans.  London cocoa added to its gains Wednesday after the British pound (^GBPUSD) dropped to a 2-1/4 year low.  A weaker pound boosts cocoa priced in terms of sterling.

Smaller cocoa supplies from the Ivory Coast are supportive for prices after the Ivory Coast government reported Tuesday that Ivory Coast cocoa farmers sent a cumulative 2.29 MMT of cocoa to Ivory Coast ports from Oct 1-July 3, down -1.3% y/y.  

Early Tuesday, NY cocoa fell to an 11-1/2 month low, and London cocoa dropped to a 1-3/4 month low on a broad-based selloff in commodities.  Also, a rally in the dollar index (DXY00) to a 20-year high this week has undercut commodity prices.  In addition, 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."  

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.
 

• Cocoa Recovers Early Losses on Smaller Supplies From the Ivory Coast
• NY Cocoa Falls as Recent Rain Should Boost West African Cocoa Yields
• Cocoa Prices Tumble as Rain Improves West African Cocoa Yields
• Cocoa Prices Weighed Down by Timely West African Rains