Cocoa processing dips globally amid hike in operation costs 

By Onome Amuge

Cocoa processing activities recorded a slowdown in the main cocoa-consuming regions of Europe, South-East Asia, and North America,partly fuelled by high operation costs amidst a strong global inflationary context and persistently higher energy costs, according to

grindings data published by the main regional cocoa associations for the first quarter of the 2022/23 cocoa season.

Data by the  European Cocoa Association (ECA) indicated a year-on-year decline of 1.7 per cent from 365,826 tonnes to 359,577 tonnes in grindings. Also, the Cocoa Association of Asia (CAA) posted a slight year-on-year drop of 0.2 per cent from 231,309 tonnes to 230,806 tonnes. In a similar vein, the National Confectioners’ Association (NCA) published a reduction of 8.1 per cent from 116,614 tonnes to 107,130 tonnes of cocoa beans ground.

Furthermore, the declining grindings during Q4 2022 moved in tandem with the net imports

of cocoa beans and cocoa semi-finished products in the European Union whereas in the United States and Canada,net imports of cocoa beans and cocoa semi-finished products were higher year-on-year.

Citing the latest trade statistics from Eurostat, the International Cocoa Organisation (ICCO) noted that imports of cocoa beans and cocoa semi-finished products in the European Union

were reduced by 13.1 per cent year-on-year in Q4.2022 to 336,000 tonnes.

On the contrary, the combined volumes of net imports of cocoa beans and cocoa semi-finished products of Canada and the United States jumped by 10 per cent from 180,000 tonnes in Q4.2021 to 198,000 tonnes in Q4.2022 based on trade statistics from the Global Trade Atlas (GTA).

Contrary to the overall decline in grindings in the main consuming markets, the ICCO in its monthly cocoa market report for January 2023 noted that top African cocoa growers are expected to further expand their domestic cocoa processing activities. The report said Côte d’Ivoire is envisioning to process nearly half of the raw cocoa beans produced in the country.

According to the ICCO, the mid-crop harvest is usually processed at origin because the size and quality of the beans are respectively smaller and lower than the main crop. Additionally, the

Conseil du Café Cacao (CCC) and the Ghana Cocoa Board (COCOBOD) sell the mid-crop harvest at a discount to all processors within the respective countries.

“So, to process 50% of the annual production, a share of the main crop has to be ground locally. Therefore, a question one could raise is whether a cocoa exporter is going to make more money

by directly selling beans of bigger size and higher quality or processing part of the main crop at origin,” the report added.

With consumers in developed countries becoming more discerning and cocoa imports in that part of the world on course to start complying with upcoming laws regarding sustainability, deforestation, child labour, traceability, etc., the ICCO projected that imports of beans for the operations of cocoa processors are likely to focus more on certain qualities other than the

import volumes

Cocoa output declines in Côte d’Ivoire, rises in Ghana

The ICCO report showed that cocoa production in Côte d’Ivoire since the start of the 2022/23 cocoa year settled at 1.650 million tonnes as at 19 February 2023, about 0.5 per cent below

1.659 million tonnes recorded at the same period of the 2021/22 season.

In addition, the country’s exports of cocoa beans during the first quarter of 2022/23 declined by 15 per cent year-over-year from 382,864 tonnes in Q4.2021 to 324,478 tonnes in Q4.2022. However, as the main crop is still ongoing, recent beneficial rains that occurred in main cocoa growing areas of the top cocoa producer have bolstered optimism for the mid-crop.

In Ghana, the latest available data on purchases of graded and sealed cocoa beans were higher year-on-year by 54 per cent, from 286,000 tonnes to 440,403 tonnes as at 3 February 2023.

Cocoa futures record upward movement in January 2023

During January 2023, prices of the nearby cocoa futures contract oscillated between $2,448 and $2,523 per tonne in London and averaged $2,488 per tonne, up by seven per cent compared to the average price of $2,324 per tonne for the nearby contract recorded at the same period of the 2021/22 cocoa year.

In New York, the average price of the MAR-23 contract settled at $2,614 per tonne, up by three per cent from $2,547 per tonne recorded in January 2022 and ranged between $2,564 and $2,689 per tonne

During 03-09 January 2022, prices of the MAR-23 contract climbed on both sides of the Atlantic, rising three per cent from $2,450 to $2,522 per tonne and by five per cent from $2,568 to $2,689 per tonne in London and New York respectively.

The ICCO noted that at the time, drier spells were prevailing in the cocoa growing zones of Côte d’Ivoire and the country’s volume of gross exports of cocoa beans for the fourth quarter of 2022 was lower year-on-year. Moving on to the middle of the month under review, prices halted their upward trend and remained within a range as market participants were awaiting grindings data for Q4.2022.

Upon the release of slightly lower year-on-year grindings data published by the main regional cocoa associations in Europe, South-East Asia, and North America, prices of the front-month cocoa contract plunged by three per cent on both markets over three consecutive trading days 17-19 January, tumbling from $2,520 to $2,452 per tonne in London and from $2,641 to $2,564 per tonne in New York.

However, the reduction recorded in prices of the MAR-23 contract was short-lived and in the course of the latter part of January 2023, prices generally reverted from their descent. In London, prices of the nearby cocoa futures contract increased by two per cent moving from $2,448 to $2,495 per tonne while in New York, they averaged $2,601 per tonne and ranged between $2,570 and $2,627 per tonne.

According to the ICCO report, the market development occurred in the midst of looming concerns of potential crop problems in Ghana due to the negative effect of the Cocoa Swollen Shoot Virus Disease (CSSVD) on the country’s cocoa production.