NIGERIA—A report by the International Cocoa Organization (ICCO) shows that cocoa prices have declined by an average of 33% in the international market after an increased supply of the commodity from producing countries despite low liquidity.
According to the report, international cocoa prices have dropped from a record high of US$11,720 in mid-April to US$7,810 at the start of May.
The decline is attributed to increased output in cocoa-producing areas like Nigeria, Ghana, and Ivory Coast.
The output is partly due to the price rally experienced at the start of 2024, which encouraged more farmers to tend to the crop.
The increased output is also due to improved weather conditions—cocoa in the Ivory Coast was plagued by scorching sun and delayed rainfall, which affected output and prices.
It also led to long liquidation speculations that left the market open.
The report reveals that some buyers, like FTN Cocoa Processors, reported they could not purchase cocoa at high prices and passed the cost on to customers.
The relatively open market, coupled with mid-crop season rainfall in cocoa-producing countries, has also contributed to the decline in international prices.
However, the price drop in the international market may not directly affect farmers.
This is because the current price is still higher compared to price gains in 2023.
The price decline may not affect Nigerian farmers because of the weaker naira.
Cocoa prices in Ivory Coast will not be immediately passed on to farmers and the local market.
The country uses a stabilized pricing system, which means prices will require a time lag to adjust.
The report also predicts prices could remain volatile over the next few months.
They are expected to remain volatile because lower-quality cocoa yields are common in the ongoing rainy season.
It also depends on how much the yields bridge the global cocoa deficit and production capacities.
The report predicts prices should start stabilizing in September.
Nigeria is the fourth-leading cocoa grower globally.
Ivory Coast is the largest cocoa producer globally; it accounts for 40% of all cocoa produced worldwide.
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