The last time a tonne of US-traded cocoa fetched more was in March 2011, when it rose to as high as $3,826. “It Looks like we have a combination of things,” Sterling Smith, director of agricultural research at AgriSompo North America in Omaha, Nebraska, told investing.com. “Global cocoa demand has been really sudden and improving. Many countries that weren’t traditional cocoa buyers [such as China] are now becoming consumers and pushing things higher. There have been crop issues as well.”
London cocoa futures on ICE also rose to another 46-year high this week, up 3% at 2,879 pounds a metric ton on Tuesday (29 August) after setting a 46-year high of £2,88, buoyed by tightening supplies, while raw sugar prices touched a two-month peak before turning lower.
“The market has regularly set new 46-year highs since late June, lifted by tightening supplies as crop problems in West Africa contribute to a large global deficit expected in the current 2022-23 season (October-September),” an analyst said on Nasdaq.com.
The International Cocoa Organization (ICCO) is expected to issue a quarterly update in September. It could increase the size of its global deficit projection from the 142,000 metric tons forecast in its last update.
Rains in Cote d’Ivoire were below average last week in most of the country’s main cocoa-growing regions, but soil moisture content was still high enough to help strengthen the next October-to-March main crop, farmers told local media.
The present El Niño event and record global warm ocean temperatures are one of the reasons we are seeing record high prices, weather watcher Jim Roemer told ConfectioneryNews. “You will notice both El Niño and what we call a positive Tropical Atlantic Index are responsible for the active tropics – and record warm oceans surrounding West Africa increase evaporation and pour unwanted rains on cocoa pods.”
In his latest WeatherWealth newsletter, Roemer also reported that unwanted rains during West Africa’s normally dry season are causing disease issues for the cocoa crop.
“This is the end of West Africa’s dry season, and they need sunshine and dry weather for pods to develop properly. Cote d’Ivoire and Ghana produce 70% of the world's cocoa crop. The cocoa crop is one of the worst in recent memory, and this rain will increase disease issues. A combination of fertilization problems a year ago means that farmers did not take care of their groves as well as they normally do. Now you have cocoa rotting in parts of the fields of Ghana and perhaps a bit in Cote d’Ivoire.”
Roemer said that his ClimatePredict programme in his newsletter has been suggesting for months that it will be too wet in West Africa with more disease issues.
“Overall,” he says, “sharply higher cocoa prices due to weather are a net positive for large chocolate brand owners who have the power to pass on costs to consumers. But it can strain retailers, restaurants, and ingredient suppliers who cannot raise prices proportionately. The equity impact depends on a company's position in the cocoa-chocolate supply chain.”