WORLD– International cocoa prices closed higher on the week ended July 5 as concerns over dwindling ICE-monitored inventories continue to shock the market.
Cocoa futures increased by 1.87% (+144) in New York and 4.67% (+292) in London in the reported week.
The price increase was primarily caused by reports of ICE-monitored cocoa inventories held in US ports dropping to a 3-and-a-half-year low of 3.16 million bags. This exacerbated the previous week’s reports of inventories declining to 3.2 million bags.
Cocoa prices also increased due to the dollar’s slide to a three-week low, which supported most non-US commodities, including the key chocolate ingredient.
The other bullish price factor was data released by the Ivory Coast government on July 1, which showed farmers shipped 1.59 million tons of cocoa beans from ports between October 1, 2023, and June 30, 2024, a 29% decrease from the previous season.
Market analysis firm Trader Ecom Agroindustrial predicts cocoa production in the world’s largest producer in the 2023/2024 season will reach an 8-year low of 1.75 million tons, a 21.5% decline from the previous year.
However, price movements remain volatile in the market, still affected by various bearish factors.
The key bearish factor is recent reports indicating a possible rebound in cocoa production by Ghana and Ivory Coast. On July 1, Bloomberg reported that the Ivory Coast is set to harvest 2 million bags in the 2024/2025 season due to improved weather.
Ghana’s cocoa regulator also predicted Ghana’s cocoa production will rebound to 700,000 tons in the 2024/2025 season from the current estimates of 425,000 for the 2023/2024 season. These reports caused cocoa futures to post a 5-week-low on the first day of the reported week.
Demand concerns remain the most significant factor affecting cocoa prices. The continued reports of dwindling ICE-monitored inventories in the US has negatively affected the market’s outlook with players like Nestle predicting a rut in the market before supply stabilizes.
Market analysts warn the current high future prices are likely to trickle down to manufacturers, forcing them to raise prices even further, which would make customers cut back on chocolate purchases.
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