Ideal crop conditions in West Africa sharply reduce cocoa prices

WORLD – Cocoa prices closed sharply lower in the week ended July 19 after forecasters predicted improved growing conditions in West Africa could boost cocoa yields.  

Cocoa futures dropped by 4.71% (-380) in New York and 4.30% (-285) in London in the reported week.  

The sharp price decline followed a forecast released by Maxar Technologies on July 17 indicating showers might continue in the week starting July 22, which would keep moisture content favorable for crop growth. 

Cocoa prices had initially increased slightly during the week after higher-than-expected demand fueled by an unprecedented increase in cocoa grindings in North America, Europe and Asia indicating resilience of the market despite supply chain and pricing challenges.  

According to the National Confectioners Association, North American cocoa grindings increased by 2.2% on a (year-on-year) YoY basis to 104,781 tons in Q2 2024, higher than previous estimates of a 2% decline. The European Cocoa Association reported an expected 4.1% YoY increase in cocoa grindings to 357,502 tons in the same quarter, compared to previous estimates of a 2% decline. 

This sharp decline indicates a continuation of the cocoa market’s volatility, caused by shortages in Ghana and Ivory Coast, disease, adverse weather, and insecurity (illegal smuggling and mining in cocoa-producing areas). 

Concern over the availability of cocoa beans for buyers is the primary driver of the current price volatility, especially in ports, Ghana, and the Ivory Coast.  

However, dwindling ICE-monitored inventories held in US ports is a continuing bullish factor in cocoa future prices. ICE inventories fell to a 3 and a half year low of 3.24 million bags in early July caused a sharp increase in prices.  

Government data released on July 17 revealing Ivory Coast shipped 1.61 million tons of the crop to ports between the start of the 2023/2024 season to July 14, a decline of 29%, caused a bullish ripple in the market. 

Ghana’s cocoa regulator projected the country’s production would rebound to 700,000 tons in the 2024/2025 season compared to the estimated 429,000 in the current season, which caused a bearish ripple in the market. 

The current volatility is expected to continue until harvests in the 2024/2025 season are realized.  

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