Cocoa Prices Modestly Higher On Fertilizer Shortage In West Africa
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Loading... - Patrick Okine
- 16 Aug 2022
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Cocoa prices Monday posted modest gains. A lack of fertilizer for cocoa farmers in West Africa risks undercutting next year's cocoa yields in the Ivory Coast and Ghana. The war in Ukraine has limited Russian exports of potash and other fertilizers throughout the world.
An extreme short position by funds in NY cocoa futures may provide fuel to any short-covering rally. Last Friday's weekly COT data showed funds boosted their short position in NY cocoa futures by 138 in the week ending Aug 9 to 31,522 short positions, the most in about 3 years.
The Ivory Coast government reported last Tuesday that Ivory Coast cocoa farmers sent a cumulative 2.390 MMT of cocoa to Ivory Coast ports from Oct 1-Aug 7, up +0.4% y/y.
In a bearish factor, cocoa stocks held in ICE-monitored port warehouses last Friday rose to a 2-month high of 5,707,495 bags.
In a bullish factor, Ghana reported July 27 that its 2021/22 cocoa crop fell by -35% y/y to 685,000 MT, the smallest crop in 12 years, due to drought and swollen shoot virus. Ghana is the world's second-largest cocoa producer. However, the Ghana Cocoa Board estimates 2022/23 Ghana cocoa production will rebound +31% y/y to 850,000 MT.
Global cocoa demand for Q2 has been mixed. The Cocoa Association of Asia (CCA) reported July 22 that Q2 Asia cocoa grindings rose +3.6% y/y to 228,895 MT, a new record for the quarter and the second-highest grind in the history of the CCA. Conversely, the European Cocoa Association on July 20 reported that European Q2 cocoa grindings fell -2.5% q/q to 364,081 MT. The National Confectioners Association on July 22 reported that Q2 North American cocoa grindings fell -6.3% y/y to 115,899 MT.
Recent reports on chocolate demand have also been mixed. Researcher IRI reported July 14 that the volume of chocolate products sold in the U.S. dropped -1.5% y/y in the 13 weeks ended June 12. However, Barry Callebaut, the world's leading manufacturer of chocolate and cocoa products, reported last Wednesday that its global chocolate sales grew +9.1% in the first nine months of the fiscal year 2021/22 ended May 31.
In a bullish factor, the International Cocoa Organization (ICCO) June 1 said that weather conditions and disease are negatively affecting cocoa production this year. Also, trade disruptions and high freight rates are impacting the cocoa and fertilizer trade. ICCO said the shortage of fertilizers on cocoa farms would likely hurt cocoa bean crop quantity, quality, and size next year. Read More...
