Skip to content

Cocoa prices reach 12-year high as supply threats intensify

Cocoa prices reach 12-year high as supply threats intensify
Jordan Major

Cocoa prices surged to a 12-year high on August 29, with the Cocoa Sep ’23 (CCU23) futures contract hitting 3,555s, marking a remarkable gain of 113 points (3.28%).

This unprecedented rally comes amid escalating concerns about global cocoa supply disruptions, primarily triggered by adverse weather conditions and diseases plaguing major cocoa-producing regions.

Over the past three months, prices of the commodity have witnessed a relentless upward trend driven by a series of adverse events. The recent heavy rains in West Africa have aggravated the spread of black pod disease, a menace that turns cocoa pods black and causes them to rot. This disease outbreak, catalyzed by the excessively wet weather, jeopardizes the quality and quantity of cocoa crops, raising the specter of a third consecutive year of deficit for the 2023/24 season.

Supply turmoil

Adding to the supply turmoil is the alarming spread of the swollen shoot virus in Ivory Coast, a key cocoa-producing country. This virus, transmitted by mealybugs that feed on cocoa plants, not only diminishes crop yields significantly but ultimately leads to the death of the cocoa plants. Reports suggest that approximately 20% of Ivory Coast’s cocoa crop is now afflicted by this destructive virus.

In Ghana, the world’s second-largest cocoa producer, a combination of factors has hampered cocoa output. The cocoa regulator’s announcement that its cocoa farmers are unlikely to meet contracts for a second season, postponing 44,000 MT of cocoa shipments due to supply shortages, has further tightened the supply outlook. Ghana’s cocoa yield for the 2022/23 season is anticipated to hit a 13-year low of around 650,000 MT, marking a steep 24% decline from initial estimates of 850,000 MT.

Bolstering these supply-side concerns are projections from industry experts, including Marex Financial, indicating a deficit of -279,000 MT in the global cocoa market for the 2023/24 season. The stock-to-consumption ratio is expected to plummet to 30%, the lowest level seen since 1985.

Amid these challenges, robust demand for cocoa remains a supporting factor for prices. Gepex, a leading exporter group, reported a 3% year-on-year increase in Q2 cocoa processing, indicating strong consumption trends. Furthermore, the looming threat of an El Niño weather event, which historically has disrupted cocoa production, has sparked further supply worries.

10% increase in dollar sales of chocolate in the past year

As the global economy reopens post-pandemic, chocolate consumption has surged, driving up cocoa demand. Nielsen data reveals a 10% increase in dollar sales of chocolate in the past year, while research firm Euromonitor forecasts a 5.8% growth in global chocolate confectionery sales, reaching nearly $26 billion in 2023.

In light of these converging factors, cocoa prices have reached multi-year highs, highlighting the intricate interplay between supply disruptions and demand dynamics in shaping commodity markets. As the industry grapples with these challenges, market participants are bracing for a period of heightened volatility and strategic decision-making.

Buy stocks now with Interactive Brokers – the most advanced investment platform


Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

Best Crypto Exchange for Intermediate Traders and Investors

  • Invest in cryptocurrencies and 3,000+ other assets including stocks and precious metals.

  • 0% commission on stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

  • Copy top-performing traders in real time, automatically.

  • eToro USA is registered with FINRA for securities trading.

30+ million Users
Securities trading offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Finbold.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD

Read Next:

Finance Digest

By subscribing you agree with Finbold T&C’s & Privacy Policy

Related posts

Sign Up

or

By submitting my information, I agree to the Privacy Policy and Terms of Service.

Already have an account? Sign In

Services

IMPORTANT NOTICE

Finbold is a news and information website. This Site may contain sponsored content, advertisements, and third-party materials, for which Finbold expressly disclaims any liability.

RISK WARNING: Cryptocurrencies are high-risk investments and you should not expect to be protected if something goes wrong. Don’t invest unless you’re prepared to lose all the money you invest. (Click here to learn more about cryptocurrency risks.)

By accessing this Site, you acknowledge that you understand these risks and that Finbold bears no responsibility for any losses, damages, or consequences resulting from your use of the Site or reliance on its content. Click here to learn more.