CropGPT - Cocoa - Week 27

CropGPT - Podcast for Soft Commodities

Welcome to the weekly summary of the global Cocoa Market Summary - Week 27 - Crop GPT. For more information on any aspect of this report, please visit the CropGPT website for far more detailed reporting and analysis.

Prominent market analysts and organizations predict significant deficits in cocoa production, leading to bullish pricing expectations. Pierre Andurand and his firm forecast a substantial deficit ranging from 650,000 to 700,000 tons this season, largely attributed to reserve depletion. The International Cocoa Organization estimates a smaller, yet still considerable deficit of 439,000 tons, while Marex estimates 475,000 tons this season.

Cocoa inventories monitored by the ICE in United States ports have dropped to a three-plus year low, with current levels at 3,180,517 bags. In the Ivory Coast, farmers shipped 1.59 million metric tons of cocoa to ports from October 1 to June 30, a decrease of 29% from the same period last year. Ecom Agroindustrial forecasts a significant year-over-year drop of 21.5% in Ivory Coast's 2023/24 cocoa production, reaching an eight-year low of 1.75 million metric tons.

Production shortfalls in key cocoa-producing countries are contributing to bullish price expectations. Carlos Mera of Rabobank highlighted that Ghana produced only 500,000 tons of the 800,000 tons it had contracted to sell, rolling over the remainder to the next season. While new plantations in Ecuador are anticipated to help meet global demand, ADM Investor Services warns that the crop remains at risk, particularly with continued declines in fresh crop arrivals from the Ivory Coast.

Marex Group projects a surplus of 303,000 metric tons for the 2024-25 season, beginning in October, which is expected to alleviate the severe shortage that caused record-high prices this year. In anticipation of this surplus, cocoa futures in New York have already posted a five-week low. Bloomberg reported that the Ivory Coast is projected to harvest two million metric tons of cocoa in the 2024/25 season, an increase from the 2023/24 estimate of 1.8 million metric tons.

Nestle SA predicted on June 19 that consumers would reduce chocolate purchases as manufacturers raise prices in response to the recent historic rally in cocoa prices. Despite the expected increase in supply, Marex forecasts weak cocoa demand with modest growth in cocoa grindings. Parkman noted that “extreme higher cocoa prices will manifest in lower demand over the next six months.”

On June 13, Ghana’s cocoa regulator projected a significant rebound in the country’s cocoa production for the 2024/25 season, expecting it to reach 700,000 metric tons, up from 425,000 metric tons in 2023/24, due to improved weather conditions. Ghana’s 2024/25 cocoa harvest begins in October.

Improved weather conditions in West Africa have led to a decline in cocoa prices from their peak earlier this year. Cocoa futures in New York have dropped over 30% since April's highs. On Thursday, cocoa futures fell for the sixth consecutive day, the longest streak of losses since 2022, driven by improved weather in West Africa. New York futures decreased by 5.6% to $7,361 a ton, and London futures fell 10.3% to £7,010 a ton.

As cocoa prices continue to decline, hedge funds have scaled back their bullish bets. Net long positions in New York fell to 25,675 contracts by June 18, down from 70,661 in late January, according to the United States Commodity Futures Trading Commission. This reduction in speculative positions indicates a bearish outlook on the continuation of the bull market.

Remember, our CropGPT site contains far more details and reports about the Cocoa market, including crop health reports, 20 years of weather data, and even pricing data and earning call analysis. This podcast is just a few selected highlights for the week.