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Cocoa prices in the global market will likely rule firm over the next few months on support from weather conditions.
“Top producing countries are in the dry season that runs from November to March and current hot temperatures with less rain especially in Côte d’Ivoire and Ghana could have a negative toll on the 2024-25 global supplies of cocoa beans,” the International Cocoa Organization (ICCO) said.
The harmattan winds — which are cold and dry that blow from the Sahara Desert into West Africa — have started. “The less-than-ideal weather conditions since November coupled with the onset of the harmattan are supporting prices. As the current season’s output is contingent on weather conditions, should there not be much improvement in the weather, then a fourth consecutive deficit may likely occur,” said the ICCO.
Money managers bullish
Research agency BMI, a unit of Fitch Solutions, said the market sentiment for cocoa futures remains bullish, with money managers holding a net long position of 37,526 contracts for cocoa as of January 7, 2025.
“As has been the case for much of 2024, the cocoa market’s liquidity has become increasingly thin, with high prices and margin requirements pushing market participants out,” it said.
ING Think, the economic and financial analysis wing of Dutch financial services firm ING, said tight stocks after three years of consecutive deficits and concerns over dry Harmattan winds in West Africa continue to support cocoa prices.
It said the latest survey ICCO suggests that stocks at the end of the 2023-24 season were even tighter than the ICCO initially thought.
ICCO said though arrivals, graded and sealed cocoa beans in Côte d’Ivoire and Ghana have outpaced that of the previous season, severe dryness in the top producing countries have caused concerns for the current season’s output, and consequently price increases.
Price forecast
BMI has forecast second-month cocoa futures listed on International Continental Exchange (ICE) higher at $7,600 a tonne from $5,900.
Cocoa futures closed the January 16, 2025, session at $10,099/tonne, equivalent to a 0.9 per cent week-o-w increase and a 11.4 per cent month-on-month decrease. On December 18, 2024, cocoa futures reached a new record high of $11,904, it said.
Currently, cocoa on ICE is quoted at $11,157 a tonne. Prices are down by 0.80 per cent year-to-date but up over 135 per cent year-or-year.
Though cocoa prices pared their gains after surging to a record high of $11,461 on April 19, 2024, they gained on concerns over production, BMI said.
ICCO said since the start of the 2024-25 season to December 29, 2024, cocoa arrivals at Ivorian ports were reported to be up by 27.4 per cent at 1.054 million tonnes (mt). In Ghana, graded and sealed cocoa beans were reported to be up by 57.7 per cent at 366,075 tonnes.
Products price may rise
BMI said 2024-25 cocoa production in Cote D’Ivoire and Ghana is unlikely to recover fully from the 2023-24 losses. This is due to high prevalence rates of swollen shoot virus diseases, old and less productive trees, and low levels of investment in the sector due to limited profits available to farmers.
The research agency forecast Cote D’Ivoire production to increase 10.8 per cent to 1.95 mt from 1.76 mt in 2023-24 and below the 2022-23 output of 2.24 mt. Ghana’s output is projected to rise to 590,000 tonnes from 450,000 tonnes in 2023-24. It will be below 654,000 tonnes produced in 2022-23.
ICCO said amid the soaring prices of cocoa beans, chocolate manufacturers may end up raising the price of their products. “For example, Lindt & Sprüngli has announced price increases on the back of soaring cocoa prices,” it said.
Demand dipping
The cocoa organisation said 2024 fourth quarter grindings data published by key regional cocoa associations revealed a year-on-year decline – an indicator that cocoa demand is plummeting.
“The significant rise in cocoa prices will inevitably affect demand. Nevertheless, there are some justifications for the price increases as the general view expected for the 2024-25 season is a fourth supply deficit. Until current market fundamentals show signs of improving production, cocoa prices may continue to be high,” said the ICCO.
However, should demand continue its downtrend, then the market may head towards an equilibrium.
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