Cocoa prices outlook: grindings exceed pre-pandemic levels

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Cocoa prices are higher compared to a similar period in the previous year as global demand recovers. At the current level of $2,544, the current futures contract is lower than $2,236 in the beginning of November 2020. However, a bumper harvest may curb the recorded gains.

cocoa prices
cocoa prices

Rising demand

The consumption of chocolate and the broader cocoa industry is on recovery as the world progresses away from the coronavirus pandemic. To begin with, vibrance in the travel sector is crucial for the industry’s gains. This is based on the fact that significant sales are made in airports’ duty-free shops are people travel to different locations across the world.

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After travel bans that characterized the past year, various countries have continued to ease the restrictions. For instance, the US is expected to open its borders for the vaccinated tourists in the new month. Such an environment is expected to increase demand and boost cocoa prices.  

Besides, recent data from the German Confectionary Association (BDSI) indicated that cocoa grindings in the country has risen for two consecutive quarters. In Q2’21, the reported grindings were 108,615 tonnes, which is a 16.35% increase from Q2’20. Besides, it is 5.1% higher than the figure recorded in the pre-pandemic period in Q1’19.

In North America, the National Confectioners Association’s report shows that cocoa grindings surged by 4.3% in Q3’21 compared to Q3’20 and 3.6% compared to Q3’19. Furthermore, in Asia, the Cocoa Association of Asia recorded grindings of 210,970 tonnes in Q3’21. The figure is a 4.1% rise from a similar period in 2020.

Supply outlook

While the expected rise in demand is set to boost cocoa prices, increased supply will likely curb the gains. Similar to other commodities, a bullish market is founded on heightened demand and tight supplies.

Ivory Coast, which is the leading producer of cocoa in the world, has been experiencing favorable weather conditions. Most of the cocoa-growing regions within the West African country are receiving substantial rainfall during the current April-November rainy season. In particular, above-average rainfall has been recorded in western, eastern, and southern regions of Soubre, Abengourou, and Agboville respectively.

The favorable weather has increased optimism about the main crop during the October-March season. In the coming month, harvesting will likely rise sharply as the cocoa pods are on the verge of ripening.

Despite the expected bumper harvest, the tonnage received in the country’s ports is lower than last year during the same period. As at 24th October, 277,000 tonnes had arrived in the ports since the beginning of the current season on 1st October. The figure is a decline of 15.3% from 2020’s 327,000 tonnes.   

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