Cocoa prices rally sharply amid renewed Ghana supply concerns

WORLD- Cocoa prices closed slightly higher in the week ended July 26 owing to market concerns over Ghana’s plan to ration bean supplies in the new marketing season due to production level doubts. 

Cocoa futures increased by 2.96% (+231) in New York and 1.88% (+120) in London in the reported week. 

Future rallying started at the start of the reported week after Ghana’s cocoa regulator revealed plans to limit cocoa future purchases for the 2024/2025 season amid concerns over harvest volumes. The regulator revealed it would distribute beans equally to buyers, albeit prioritizing those with local processing licenses.  

Cocoa prices then fell back slightly on Wednesday (July 24) after demand concerns after confectioner Lindt & Spruengli warned of diminished chocolate demand due to high prices but quickly rallied in the remaining days of the week.  

This week-long price fluctuations reflect the current volatility of the cocoa market, fueled primarily by production and supply chain issues.  

A major bearish factor affecting cocoa prices is the recent forecast by meteorologists and analysis firms like Maxar Technologies, which predict improved growing conditions moving forward due to improved weather conditions, which should increase supply. 

The other major bearish factor that has affected future prices is support from better-than-expected demand in Europe, Asia, and North America. In the week that ended July 12, the National Confectioners Association revealed that North American cocoa grindings in Q2 2024 increased by 2.2% (year on year) compared to a predicted decline of the same percentage points.  

The European Cocoa Association also reported cocoa grindings for Q2 2024 increased by 4.1% YoY compared to a predicted decline of 2.2%. 

However, the recent announcement revealing that ICE-monitored cocoa inventories in the US fell to a three-and-a-half-year low of 3,024,658 bags was a significant bullish factor in July. Government data from the Ivory Coast show that farmers shipped 1.62 million tons of the commodity from October 1 to July 14, a 29% decline from the previous year, which is also another significant bullish factor. 

According to analysts, the current price volatility is set to continue until the end of the season, at least until production rebounds in Ghana and Ivory Coast, the two largest cocoa producers in the world.

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