Cocoa Prices Rebound From 1-Week Low on Dollar Weakness

September ICE NY cocoa (CCU22) on Monday closed up +79 (+3.44%), and September ICE London cocoa #7 (CAU22) closed up +43 (+2.53%).

Cocoa prices on Monday rebounded from 1-week lows and settled sharply higher as a weaker dollar sparked short-covering in cocoa futures.  

Cocoa prices Monday initially fell to 1-week lows on negative carry-over from last Friday when the National Confectioners Association reported that Q2 North American cocoa grindings fell -6.3% y/y to 115,899 MT.  

Global cocoa demand for Q2 has been mixed.  The Cocoa Association of Asia (CCA) reported last Friday that Q2 Asia cocoa grindings rose +3.6% y/y to 228,895 MT, a new record for the quarter and the second-highest grind in the history of the CCA.  Conversely, the European Cocoa Association reported last Wednesday that European Q2 cocoa grindings fell -2.5% q/q to 364,081 MT.

Recent reports on chocolate demand have also been mixed.  Researcher IRI reported July 14 that the volume of chocolate products sold in the U.S. dropped -1.5% y/y in the 13 weeks ended June 12.  However, Barry Callebaut, the world's leading manufacturer of chocolate and cocoa products, reported last Wednesday that its global chocolate sales grew +9.1% in the first nine months of the fiscal year 2021/22 ended May 31.  

Ample cocoa supplies from the Ivory Coast are bearish for cocoa prices after the Ivory Coast government reported Monday that Ivory Coast cocoa farmers sent a cumulative 2.365 MMT of cocoa to Ivory Coast ports from Oct 1-July 24, up +0.6%  y/y.  

In a bullish factor, the International Cocoa Organization (ICCO) 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, was supportive of cocoa prices after data released July 4 showed that 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.
 

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