In its latest bulletin, the ICCO said: ‘With the recent surge in freight rates due to tensions in the Red Sea area, international trade is likely to be affected. With already high cocoa prices, an additional cost resulting from high freight rates may be daunting for cocoa users and could affect demand’.
As part of its monitoring of cocoa beans, the ICCO said it will check for any sudden fluctuations in grinding trends as the season progresses.
2023 price summary
In a summary of cocoa price movements in 2023, ICCO data revealed that the annual average price of the nearby contract in London had firmed by 46%, the highest since 1973. During the same period in New York, the average of the first position contract prices strengthened by 35% year-on-year. Furthermore, the annual average of the US-denominated ICCO daily price stood at US$3,261 per tonne, up by 38% compared to the previous year's average price. The average Euro-denominated prices increased by 34% year-over-year, attaining €3,015 per tonne in 2023.
During 2023, supply was the major contributory factor that fuelled bullish prices. In January 2023, gross exports of cocoa beans from Côte d’Ivoire were lower compared to the previous year's period. Other factors that signaled supply deficits and elevated cocoa prices were unconducive weather conditions and diseases.
Floods caused delays to the mid-crop harvest. Moreover, black pod disease and swollen shoot virus due to the excess rains during the last quarter of 2023 heightened concerns about a shortfall in supply.
Cocoa deficit
The ICCO said that by the end of December 2023, the current 2023-24 season was also headed for an imminent deficit, as in the prior two years. Figures show that the nearby contract price, at US$4,467 per tonne in London on the last trading day of December 2023, made a yearly gain of 79% compared to its counterpart of December 2022, which was at US$2,491 per tonne.
For the same period in New York, the nearby contract price rose 61% from US$2,601 per tonne to US$4,200 per tonne.
The ICCO said that at the time of writing (January 2024), rainfall in cocoa-growing regions in Côte d’Ivoire, the world’s largest cocoa producer, ‘is envisaged to bode well for the upcoming mid-crop.’ However, supplies from the country are still below the previous season’s level.
According to local media reports, since the start of the season on 1 October 2023, main crop cocoa arrivals at Ivorian ports had reached 914,000 tonnes by 14 January 2024, down 36% from the same period last season.
New York and London cocoa markets
Both markets in London and New York were in ‘backwardation’ during the first half of December 2023. The ICCO said an observation from the price movement is that before the expiration of the December 23 contract, the price difference between the December 23 and March 24 contracts was much lower in London at an average of US$9 but showed significant values in the New York market at an average of US$141.
With the nearby contract trading higher than later contracts due to supply tightness and prices heading in backwardation, the lower price difference between the December 23 contract and March 24 contract in London as compared to New York can be attributed to the volume of beans reaching these two locations, the ICCO said.
Since the two top producers’ (Cote d’Ivoire and Ghana) bean supplies are customarily destined for Europe, with low output expected for the ongoing season, there may have been less cocoa available to New York, thus resulting in the broader backwardation for New York cocoa futures, the ICCO advised.
“As the year progresses, attention will be paid to price movements before expiration of contract months to determine whether the New York market price differences between the first and second trading months outpace that of price differences in London and what the underlying factor may be.”
