Onome Amuge
After two years of deficits, cocoa prices have been rising due to expectations of another deficit in the current season,according to the International Cocoa Organisation (ICCO).
The ICCO in its latest report for the month of October 2023, noted the cocoa futures market in London saw a 12 per cent increase in prices, from $3,676 per tonne to $4,102 per tonne. Similarly, cocoa futures prices in New York increased by 9 per cent, from $3,500 per tonne to $3,822 per tonne.
The report noted that the continued increase in prices is being driven by a combination of factors, including increasing demand and a tightening global supply of cocoa. Moreso, the cocoa supply has been negatively impacted by factors such as adverse weather conditions, particularly drought in West Africa, the leading producer of cocoa beans. In addition, the increased use of cocoa in food and cosmetic products has been driving up demand. As a result of these factors, cocoa prices have been rising and are expected to remain bullish in the near future.
In addition to the increasing prices, it is worth noting that the amount of carry-over beans from the past season to the current season was lower than expected, which has impacted the supply of cocoa beans.
The ICCO noted that cocoa arrivals in Côte d’Ivoire, the world’s leading producer of cocoa, were 23.1 per cent lower than the same period last season, despite an increase in producer prices.
According to the report, It is clear that the adverse weather conditions have had a significant impact on cocoa production and supply. The excess rains and flooding have not only prevented the proper drying of beans and led to degraded bean quality, but they have also made major roads in some cocoa regions difficult to access, further impacting the transportation of beans from farms to ports. However, there is hope that if the weather returns to normal conditions, more beans will be able to leave the farms and improve arrivals.
The report also showed that another factor that may be impacting the supply of cocoa beans in Côte d’Ivoire is cross-border trading with neighboring countries. Since Ghana’s producer price is significantly higher than that of Côte d’Ivoire, it is likely that some cocoa beans may be moving across borders in search of higher prices. This may explain the low levels of cocoa bean arrivals at ports in Côte d’Ivoire. However, further information on cumulative arrivals will be needed to confirm this hypothesis.
The average prices for the nearby cocoa futures contract in both London and New York during October 2023 were significantly higher than the same period in the previous season. This is likely due to a combination of factors, such as weather conditions, cross-border trading, and increased demand.
According to data from the European Cocoa Association, National Confectioners Association, and Cocoa Association of Asia, total cocoa grindings for the 2022/23 season are down by almost 4 per cent from the previous season.
Given the volatility of cocoa prices and the uncertainty around future demand,the ICCO stated that it is too early to draw any definitive conclusions. While the current trend may seem to indicate an improvement in demand, it is possible that high prices and a slowdown in production could reduce consumer spending and alter this trend.
In summary, the report noted that the impact of high cocoa prices and production slowdowns on demand remains uncertain. However, while it is possible that consumer spending could be impacted, more data is needed to draw definitive conclusions.
