Cocoa bean prices showed mixed performance on August 2, 2024 in London and New York futures markets due to diverse market factors.
The International Coffee Exchange (ICE)’s prices in New York for September 2024 deliveries lost 0.56% day-on-day. This is even as similar ICE deliveries in London gained by 0.33%.
The New York fall was the steepest from July through early August, and analysts are now contextualizing the reasons.
Beforehand on July 29, aggregate futures prices touched $7,648.41 per tonne while on August 1 they reached $7,704.32 a tonne.
Despite the marginal rise, the two daily rates were still far from April 15, 2024’s high of $12,535.81 a tonne.
The Bearish Factors
A major culprit for the price loss is the weak demand in chocolate. This came to light on August 1, 2024, when chocolate maker Hersey reported quarterly sales decline, which pressured prices further.
Also on the bearish side was the news that Nigeria, a top 5 exporter, shipped 18% more cocoa year-on-year in June 2024. This according to a July 29 Bloomberg report.
Remarkably, Nigeria had also reported a 19% rise in yearly cocoa bean shipments three months earlier in March, 2023.
There is also the weather factor that is favoring future production but fueling price declines. Forecasts show that a West African La Niña shift is promising to provide better moisture to cocoa plantations than the foregoing El Niño.
The Bullish Factors
The cocoa market however had good price news in London in the first week of August 2024 owing to a weak sterling pound. This led to short-covering through increased purchases as traders anticipated to sell at a higher price when the pound improves.
Another positive outcome for prices is West Africa’s current crop, which could succumb to moisture-related diseases.
As rains increase, farmers are trying to prevent the comeback of Black Pod disease through spraying. However, others are bypassing sprays due to upshot cost of chemicals. This has lent a bullish mood to markets, which see a disease onset as a factor for low production and high prices.
Finally, despite chocolate demand slowing, ground cocoa demand seems to be up and could be good for prices. Continental grinders such as the National Confectioners Association (NCA) of North America are thereby increasing grinding. For instance, NCA reported that North American grindings upped by 2.2% in Quarter 2, 2024, to 104,781 tonnes. Actually, earlier forecasts by analysts had expected a gradual decrease.
In short, the first week of August has witnessed mixed cocoa bean prices in world markets due to varying factors. And as the statistics below disclose, the price trend owes much to production factors in mainly West Africa.
Cocoa Bean Prices Versus Production Statistics
Cocoa production and price swings go hand-in-hand. Because West Africa provides over 70% of world cocoa, its production more or less determines market direction and prices.
How has cocoa production performed in Africa over the past 50 years?
In 1970, Africa produced 1.12 million tonnes, more than half the global total. The same share happened in 1980 at 1.03 million tonnes, 1990 at 1.52 million tonnes, and 2000 at 2.11 million tonnes. The trend continued in 2010 at 2.78 million tonnes and 2022 at 4.10 million tonnes. Lately, starting 2023, cocoa production in Africa has declined and therefore could impact the top-of-the-decade production.
How have cocoa price performed in the world over recent years?
With production increasing gradually, beginning in 1961, so have prices declined over the years, before recovery in late 2023. In the 2010s, the cocoa price hovered below $3.14 a kg, its high point being in 2015. In the early 2020s, which coincided with high production, the price moved to $2.39 a kg in 2022. However, by 2023, amid a production decline, the price upped to $3.28 a kg. The 2024 rate, on the other hand, has stayed at a five-decade high of over $7.00 a kg owing to a global deficit.