Cocoa Futures Are Currently Down In Anticipation of Higher Supply from Ivory Coast and Ghana

Cocoa Bean

Ivory Coast

Published Sep 14, 2022

For the upcoming cocoa season (October 2022–September 2023), it is anticipated that the production will climb due to favorable weather conditions in the cocoa growing regions in Africa. The higher production is likely to push down the prices of cocoa, which have already been downward for a while now. In the second week of September, cocoa futures prices recorded a YoY decline of 13% and reached a 2-week low. In addition, Ivory Coast and Nigeria recorded a YoY increase in the volume of exports and Asia also registered an increase in cocoa grindings. However, it is too soon to say if the situation will be the same in the coming months, and speculations regarding consumer demand remain uncertain.

This season, which is October 2022–September 2023, the global cocoa stock is expected to move from a deficit to a balanced situation compared to the previous season. The increased stocks and balance ratios are due to growing production in the main producing countries—Ivory Coast and Ghana. According to an analysis by Reuters, Ivory Coast’s production is expected to reach 2.3 million tonnes in the new season compared to 2.18 million tonnes in the 2021/22 season. It is expected that the output in Ghana will grow from 700 thousand mt to 825 thousand mt. Despite fears about inputs, especially fertilizers, the agro-climatic conditions in producing countries in Africa remain favorable. Given the higher supply of cocoa, it is likely that cocoa prices will fall in the coming months contingent on the demand for cocoa in the market.

Cocoa futures prices on September 8th, 2022, moved lower for the third day and posted 2-week lows after the anticipation of higher production spread. The cocoa futures decreased to USD 234 per mt, which is 9.29% less than at the beginning of 2022 and 13% less than the previous year. In addition, the Ivory Coast government reported that cocoa farmers sent a cumulative 2.43 MMT of cocoa to Ivory Coast ports, higher than the previous year during the same period. Even Nigeria’s July 2022 cocoa bean exports rose +2% YoY to 15,490 MT. The Cocoa Association of Asia (CCA) reported that in Q2, Asia’s cocoa grindings rose by 3.6% in comparison to the previous year, which is a new record for the quarter and the second-highest grind in the history of the CCA. The higher trading and grinding figures point out towards ample supply in the global market.

Cocoa Future Prices

Source: Trading Economics.

However, it is still too early to say that the situation will continue to be the same in the coming months. The International Cocoa Organization (ICCO) reduced its global cocoa production estimate for 2022/23 to 4.89 million mt from 4.92 million mt in June, implying that a smaller surplus will be available as stocks in the coming season. Furthermore, the demand for cocoa and chocolate seems to be uncertain as global inflation flares up and consumers try to meet their necessities. Products like chocolates are not preferred over staples, and chocolate consumption is being reduced. However, with the opening up of the economies and travel, many countries have seen an increase in demand for cocoa and chocolates, which might pull up the prices in the long term.