Cocoa futures fall but market bullish on supply crunch

By Onome Amuge.

Cocoa futures retreated slightly from a fresh 46-year-high during the week, but an increasingly bleak outlook for production in Ghana, the world’s second largest cocoa grower, is helping support prices and could lead to an even wider global deficit in the current 2022/23 season, analysts said.

December London cocoa was down 0.8 per cent at 2,720 pounds per tonne at the closing session of the week, but still maintained a high valuation after setting a 46-year high of 2,765 pounds the previous day.

December New York cocoa  dipped $39, or 1.1 per cent, at $3,449 a tonne.

Smaller cocoa supplies from Nigeria are bullish for cocoa prices after Jun cocoa exports from the world’s fourth largest cocoa bean producer  fell 8.5 per cent year-on-year to 12,245 tonnes.

Analysts noted that top chocolate makers like Hershey HSY.N and Mondelez MDLZ.O face tougher trading conditions over the next year as they attempt to pass on soaring cocoa costs to cash-strapped consumers who are cutting back.

Though Cadbury-maker Mondelez expects inflation in cocoa to continue, the company said it is ensuring it is significantly hedged and continuing to drive productivity.

Sugar traded in the similar trajectory as cocoa, maintaining a high valuation, despite  October raw sugar settling down 0.24 cents, or 1.0 per cent at 23.76 cents per pound, after setting a three-week high of 24.74 cents a day prior.

October white sugar also settled down $7.80, or 1.1 per cent, at $687.00 a tonne, after hitting $712.20 a tonne the previous day, the highest since May 30.

Market data showed that top producer Brazil increased its forecast for 2023/24 sugar and ethanol output on the back of a bumper sugarcane crop.

Meanwhile, Arabica coffee futures traded higher on the Intercontinental Exchange after earlier hitting their lowest level in seven months as the harvest in top producer Brazil draws to an end.

December arabica coffee gained 0.9 cents, or 0.6 per cent, at $1.5 per pound, having earlier hit a low of $1.4720.

Dealers said coffee agents in Brazil had closed many deals for export in July, feeling prices were adequate.

“These deals are likely being shipped out at present, so Brazil’s August arabica export figures most likely won’t disappoint,” they noted.

In contrast, November robusta coffee was down $28, or 1.2 per cent, at $2,363 a tonne.

Robusta coffee prices are forecast to end the year below current levels but still register an annual increase of 28 per cent, according to a Reuters poll of traders and analysts.