Cocoa output stumbles globally in 2021/22 season

By Onome Amuge

Global production of cocoa  is estimated to have dropped by 8.0 per cent to 4.823 million tonnes as output declined year-on-year in both Côte d’Ivoire (-6%) and Ghana (-34%) in the 2021/22 season. This was largely attributed to periodically inappropriate weather conditions in Côte d’Ivoire and the devastating effect of the Cocoa Swollen Shoot Virus Disease (CSSVD) in Ghana.

At the end of November, the estimates for the 2021/22 cocoa season published by the ICCO Secretariat in its latest issue of the Quarterly Bulletin of Cocoa Statistics (QBCS), reported a supply deficit of 306,000 tonnes.

In Africa, production is seen on a decline, moving down by 11.3 per cent to 3.594 million tonnes. However, crop output is estimated to have increased by 3.2 per cent to 963,000 tonnes in the Americas and by  4.7 per cent to 266,000 tonnes in Asia and Oceania.

The International Cocoa Organisation observed that the reduction in the outputs of the top two world cocoa producers plunged the global cocoa market into a supply deficit which could not be overlooked in the global market. However, the cocoa growing conditions for the ongoing main crop of the 2022/23 season are generally good in West Africa, hence creating  positive expectations for the region’s cocoa production.

 In Côte d’Ivoire, cumulative arrivals of cocoa beans at ports were estimated at 954,000 tonnes as at 11 December 2022, reflecting a 10 per cent year-on-year increase compared to 867,000 tonnes reported in the corresponding period of 2021. Though information on volumes of purchases of graded and sealed cocoa beans in Ghana is yet to be released, favourable weather conditions during the development stage of the current crop are envisaged to result in a better harvest as compared to the previous crop year.

“Cocoa supply currently does not seem to be of concern especially as harvest seems to be following a positive trend combined with a decrease in freight rates and transit times. It is noteworthy that the unusually above-average rainfall recorded in the main cocoa-growing regions of West Africa during November raised concerns over the ongoing crop as excess rain could potentially result in the propagation of the black pod disease, and thereby cut into the volume of the crop,” the report noted.

However, the report stated that the demand side of the market seems uncertain. The slowdown in the global economy and inflationary impact on raw materials, combined with exorbitant energy prices in Europe which is the leading region for cocoa processing, are likely to take a toll on the operations of cocoa processors.

Inversely, grindings increased to 5.081 million tonnes, up by 100,000 tonnes, representing a 2.0 per cent increase compared to the revised estimate of 4.981 million tonnes for the 2020/21 cocoa season. It is estimated that processing activities have expanded by 2.3 per cent to 1.850 million tonnes in Europe, whereas a growth of 7.5 per cent to 1.128 million tonnes is seen for Africa.  In the Americas, processing activities were down  4.7 per cent to 928,000 tonnes while in Asia and Oceania, grindings increased 2.2 per cent to 1.175 million tonnes compared to the level attained during the previous season.

In its assessment of the size of cocoa beans stocks in exchange-licensed warehouses in Europe and the United States, the ICCO pointed out that at this stage of the cocoa year, total stocks of cocoa beans in the exchange-licensed warehouses are higher year-over-year on both sides of the Atlantic.

At the end of November 2022, total stocks in exchange-licensed warehouses in Europe amounted to 185,090 tonnes, up by 18 per cent compared to the volume of 157,329 tonnes seen in 2021.  Similarly, stocks of cocoa beans in licensed warehouses in the United States were up by 6 per cent to 358,762 tonnes year-on-year.

Futures prices development

During November, prices of the front-month cocoa futures averaged $2,394 per tonne and ranged between $2,211 and $2,559 per tonne in London. In New York,the first position contract traded at an average price of $2,445 per tonne and fluctuated between $2,352 and $2,564 per tonne.  In the corresponding period of 2021, the average price of the front-month contract settled at $2,241 per tonne and oscillated between $2,117 and $2,303 per tonne in London. Meanwhile, prices of the first position of cocoa futures in New York averaged $2,460 per tonne and ranged between $2,320 and $2,556 per tonne in November 2021.

The nearby cocoa futures contract traded on a positive note during November in both London and New York. In London, cocoa futures prices increased substantially by 16 per cent  from $2,211 to $2,559 per tonne, while in New York they rose 3 per cent from $2,352 to $2,433 per tonne.

From 1-10 November, prices of the first position of cocoa contracts equally gained 9 per cent on both sides of the Atlantic moving from $2,211 to $2,416 per tonne and from $2,352 to $2,564 per tonne in London and New York respectively. At the time, episodes of torrential rains reported in the main cocoa-growing areas of West Africa raised concerns over a possible outbreak of the black pod disease and thereby, could contribute to the deterioration of the size of the main crop. In addition, the strike of carriers in the Ivorian port of San Pedro which is the main port for exports of cocoa was seen as a critical parameter that could disrupt the flow of cocoa exports. It was also highlighted that during October 2022, exports of cocoa beans in Côte d’Ivoire plunged by 67 per cent year-on-year from 75,231 tonnes to 24,759 tonnes. This staggering cut in the country’s cocoa exports could have partly been due to the slowing in activities at the San Pedro port.

Moving on to 11-22 November, there was a setback of 6 per cent in cocoa prices, from $2,524 to $2,372 per tonne in New York. Prices increased slightly by 1 per cent from $2374 to $2,410 per tonne in London. Meanwhile, information that market participants in the United States reported to have undertaken substantial long liquidation in the midst of concerns about global demand and weaker projections of the U.S. economy combined with the spike in COVID-19 contaminations in China took a toll on cocoa prices.

At the latter part of the month under review, prices were improved by five per cent from $2,428 to $2,559 per tonne in London and by 1 per cent from $2,403 to $2,433 per tonne in New York.