Cocoa Prices Settle Mixed With London Cocoa At A 4-Month Low On Abundant Supplies And Suspect Demand

Cocoa Prices Settle Mixed With London Cocoa At A 4-Month Low On Abundant Supplies And Suspect Demand

May ICE NY cocoa (CCK21) on Monday closed up +13 (+0.55%), and May ICE London cocoa #7 (CAK21) closed down -18 (-1.13%).

Cocoa prices on Monday settled mixed, with London cocoa falling to a 4-month nearest-futures low and NY cocoa consolidating above last Friday’s 5-month low. The outlook for bumper cocoa crops in West Africa has undercut cocoa prices and sparked fund selling in cocoa futures. Cocoa farmers in the Ivory Coast and Ghana are reporting favorable growing conditions that bode well for the mid-crop harvest that just began.

Cocoa supplies are ample from the Ivory Coast, the world’s largest cocoa producer. The Ivory Coast government reported last Thursday that cumulative cocoa bean deliveries to Ivory Coast ports during Oct 1-Apr 4 were unchanged y/y at 1.78 MMT. Also, current inventories are abundant after ICE-monitored cocoa inventories climbed to a 1-3/4 year high on Monday.

Demand concerns are also weighing on cocoa prices. Chocolate demand in Europe may suffer after France, Italy, and Germany all widened their pandemic lockdown measures in an attempt to contain the third wave of Covid.

A negative factor for cocoa was the February 26 projection from the International Cocoa Organization (ICCO) that global 2020/21 cocoa production will climb +2.5% y/y to 4.8 MMT and that the global 2020/21 cocoa surplus will widen to +102.000 MT from +10,000 MT in 2019/20.

The outlook for ample cocoa supplies is bearish for prices. On January 29, Marex Spectron projected that the global 2020/21 cocoa surplus would widen to +190,000 MT from +8,000 MT in 2019/20. Marex Spectron also projects global 2020/21 cocoa production will increase +5.4% y/y to 4.9 MMT due to a bumper crop in the Ivory Coast.

A supportive factor for cocoa was Citigroup’s action last Tuesday to cut its global 2020/21 cocoa surplus estimate to +150,000 MT from a prior estimate of +275,000 MT.

Cocoa prices found support on better-than-expected Asian and North American Q4 grinding data. Data on January 15 showed Asia Q4 cocoa grindings fell -4.2% y/y to 217,546 MT, a smaller decline than expectations of -9% y/y. Also, North American Q4 cocoa processing unexpectedly rose +7% y/y to 118,043 MT, stronger than expectations of a decline of -2.5% y/y and the highest for a fourth-quarter in 5 years. However, the European Cocoa Association reported January 20 that Q4 European cocoa grindings fell -3.1% y/y to 344,151 MT, a bigger decline than expectations of -1.5% y/y and the weakest report for a fourth-quarter in 4 years.

Story By Rich Asplund – Barchart (for https://www.barchart.com)

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