Cocoa prices pulled down by ICE inventories

ICE-monitored cocoa inventories held in US port warehouses on Monday rose to a 7-1/2 month high of 5,677,125 bags. Also, ICE-monitored cocoa inventories held in European port warehouses last Friday rose to a 7-3/4 month high of 144,430 MT, barchart.com reported.

Smaller cocoa supplies from Cote d’Ivoire remain bullish for prices after its government reported that farmers sent a cumulative 1.97 MMT of cocoa to ports for the 2022-23 marketing year (October 1 through May 7), down -4.6% y/y. 

Cote d’Ivoire is the largest cocoa producer in the world, but the risk of the spread of swollen shoot disease threatens the country’s cocoa yields.

Barchart.com said a decline in cocoa exports from Nigeria is bullish for prices after the Cocoa Association of Nigeria reported on April 27 that Nigeria's Mar cocoa exports fell -42% m/m and -34% y/y to 18,656 MT.  Nigeria is the world's fifth-largest cocoa bean producer.

In April, the National Confectioners Association reported Q1 North American cocoa grindings rose +2.4% m/m but fell -4.4% y/y to 109,666 MT. On April 20, the Cocoa Association of Asia reported that Q1 Asia cocoa grindings rose +4.09% y/y to 222,028 MT.  On April 13, the European Cocoa Association reported that European Q1 cocoa grindings rose +0.5% y/y to 375,375 MT, the highest for a Q1 since 1999. 

Barchart.com said a cocoa exporter group that includes six of the world's biggest cocoa grinders reported that its Q1 cocoa processing jumped +22% y/y to 189,405 MT.

Cote d’Ivoire’s Agriculture Ministry has reported that the mid-crop, the smaller of the country's two annual harvests that began in April, is expected to fall -25% y/y to 450,000 MT.

Darin Newsom, a senior market analyst at Barchart, said: “Last week saw the expiring May contract (CCK23) hit a high of $3,279 (per metric ton), the highest price for a nearby futures contract since December 2015.”​

Why?

“According to other sources cited in Myra’s MarketWatch piece, ‘adverse weather conditions in ‘practically all’ major producers, particularly Cote d’Ivoire (Ivory Coast) in West Africa and Ghana – which together account for more than 60% of global output – has led to a decline in cocoa production’,”​ he said.

How long will it last?

“We’ve seen the other softs markets rise and fall, basically, illustrating the key difference between supply driven (short-term) and demand driven (long-term) rallies. Fundamentally, the various softs markets remain bullish with forward curves for coffee, orange juice, sugar, and even cocoa still showing inverses (backwardation, for those of you trading in New York). But as we’ve seen in so many other commodities, most notably crude oil wheat, backwardation does not mean investment money will continue to flow into a particular market​.”

Sources: barchart.com // icco.com