Cocoa Prices Rally on Price-Support Accord

September ICE NY cocoa (CCU22) on Monday closed up +55 (+2.37%), and September ICE London cocoa #7 (CAU22) closed up +44 (2.56%).

Cocoa prices Monday closed higher after news that major cocoa buying companies reached a deal with Ghana and the Ivory Coast to ensure that their farmers receive higher prices for their cocoa crops.  The agreement is expected to substitute for a failed attempt by the governments of the Ivory Coast and Ghana in recent years to impose a $400-a-ton surcharge on cocoa purchases.

Cocoa prices on Monday were undercut by the sharp rally in the dollar index (DXY00) to a new 20-year high.  Cocoa prices also continue to be undercut by concern about a weaker global economy.

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.

Smaller cocoa supplies from the Ivory Coast are supportive of cocoa prices after the Ivory Coast government reported last 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.  

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, supports cocoa prices after last 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 Prices Fall Back on Ample Supplies and Suspect Demand
• Cocoa Consolidates After Recent Losses
• Cocoa Climbs as Heavy Ivory Coast Rain Keeps Farmers from Transporting Cocoa
• Cocoa Recovers Early Losses on Smaller Supplies From the Ivory Coast