Cocoa Jumps as a Weak Dollar Sparks Short-Covering

September ICE NY cocoa (CCU22) on Friday closed up +74 (+3.29%), and September ICE London cocoa #7 (CAU22) closed up +36 (+2.14%).

Cocoa prices Friday closed sharply higher as a slide in the dollar sparked short-covering in cocoa futures.  Cocoa prices this week were previously under pressure from the rally in the dollar index (DXY00) to a new 20-year high.  Cocoa prices were also undercut this week by concern about a weaker global economy that could curb commodity demand, including cocoa.

On Thursday, NY cocoa tumbled to a 1-year low on signs of weak global cocoa demand.  Data from researcher IRI showed the volume of chocolate products sold in the U.S. dropped -1.5% y/y in the 13 weeks ended June 12.  Also, slack European cocoa demand is bearish for prices after the European Cocoa Association reported Wednesday that European Q2 cocoa grindings fell -2.5% q/q to 364,081 MT.

Ample cocoa supplies from the Ivory Coast are also negative for cocoa prices after the Ivory Coast government reported Monday that Ivory Coast cocoa farmers sent a cumulative 2.32 MMT of cocoa to Ivory Coast ports from Oct 1-July 10, nearly unchanged 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, 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 Tumbles on Signs of Weak Global Cocoa Demand
• Cocoa Falls on Slack European Q2 Cocoa Demand
• Cocoa Prices Slip on Ample Supplies and Dollar Strength
• Cocoa Prices Rally on Price-Support Accord