Wed, April 17, 2024

Cocoa Crisis: Prices Swing Amid 374K MT Deficit Forecast

Cocoa

Quick Look

  • May London Cocoa hits 5,620 pounds a ton, then drops 1.1%.
  • May New York Cocoa falls 1.2% from a record high.
  • Industry braces for a fourth consecutive cocoa supply deficit.
  • Lindt & Spruengli to hike prices amid rising costs.
  • ICCO forecasts a widening deficit; global cocoa output to decline.
  • Venezuelan cocoa finds new markets amidst global demand shifts.

The cocoa market has recently seen a whirlwind of activity, with cacao seed prices hitting record highs before experiencing a subsequent decline. Specifically, the May London Cocoa contract reached a peak of 5,620 pounds a ton before dropping 1.1% to settle at 5,501 pounds a ton. Similarly, the May New York cacao seeds contract saw a decrease of 1.2% to $6,506 a ton, down from its record high of $6,677 a ton. Additionally, May Cocoa Futures on the US ICE Futures mirrored this trend, declining by $22.00, or 0.34%, to $6,428 per metric ton after reaching a record of $6,586 per metric ton.

Cocoa Prices: From Record Highs to Sharp Drops

Currently, the cocoa industry faces multiple challenges. Swiss chocolatier Lindt & Spruengli reported higher profits in 2023 but also announced plans to increase prices in the coming years. This decision is due to heavy reliance on West African cocoa, which has been hit by several issues, including the notorious swollen shoot disease. Consequently, a fourth consecutive supply deficit is forecasted. A 3.6% year-on-year decrease in Ivory Coast’s cacao seeds grind in January and hoarding trends among Ghanaian farmers and buyers, all anticipating higher prices, exacerbate this situation.

Chocolatiers’ Dilemma: Price Hikes Meet Supply Woes

The surge in cocoa prices is significant, with a year-to-date increase of 53% and an astonishing 131% spike over the last 12 months. The International Cocoa Organization (ICCO) forecasts a widening deficit to 374,000 metric tons for the 2023-2024 season. Global cocoa output should decrease by 11% to 4.45 million metric tons. The Ivory Coast and Nigeria are experiencing particularly pronounced declines, with expected decreases of 30% and 15%, respectively. Meanwhile, Ghana’s production estimate has hit a 14-year low of 650,000 metric tons.

Market Turmoil: Cacao Seeds Output Drops 11%

Amid these supply challenges, a decline in demand has been observed across North America, Asia, and Europe. This contrasts with trends in other agricultural commodities like corn, wheat, and soybeans, which have also shown declines in their respective markets. Despite these trends, Venezuela has emerged as a significant player, exporting 300 tons of cacao seeds to Eastern Europe and Southeast Asia. These shipments, facilitated by Xocolatl Trading and various national entities, highlight the country’s focus on the genetic superiority and unique aromas of its cocoa.

Shifting Tides: Venezuela’s Cocoa Carves New Path

The recent dynamics in the cocoa market illustrate the complex interplay between supply challenges, industry responses, and shifting global demand. As companies like Lindt & Spruengli adapt through strategic price adjustments and nations like Venezuela explore new markets, the global cocoa industry continues to navigate through a period of significant upheaval. With the ICCO’s forecasted widening deficit and the anticipated decline in global output, stakeholders across the value chain are closely monitoring these developments, hoping for market stabilization that ensures the sustainability of this cherished commodity.

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