Cocoa trades higher in August amid shortfall in cumulative arrivals
An avid reader, analytical writer and consistent content creator with several enlightening articles and reports. He is currently a journalist , Commodities, Agriculture and Technology at business a.m. newspaper. Email: amugedavido@gmail.com. Tel: +234 706 930 4947
Despite the initial decline observed at the beginning of August, prices of the SEP-22 contract moved upward on both sides of the Atlantic at the end of August.
In the month under review, prices of the front-month were up two percent from $2,102 to $2,152 per tonne and by three percent from US$2,340 to US$2,407 per tonne in London and New York, respectively.
The Intercontinental Cocoa Organisation (ICCO) attributed the upward trend to various factors, including decreased cumulative arrivals of cocoa beans at Ivorian ports as well as lower year-on-year volumes of graded and sealed cocoa beans from Ghana.
As at 7 August, cumulative arrivals of cocoa beans in Côte d’Ivoire were reported at 2.034 million tonnes, down by 3.6 percent compared to the volumes recorded during the corresponding period of the previous season.
In addition, over the period October 2021-July 2022, domestic grindings in Côte d’Ivoire totalled 529,000 tonnes, representing a 15 percent increase year-on-year compared to 461,000 tonnes ground over the same period of the previous season.
In Ghana, cocoa production for the 2021/22 season reported a decline to reach a 12-year low at 689,000 tonnes.
Trends were however reversed from 11-24 August as prices nosedived on both the London and New York markets. In London, prices plunged three percent, moving from $2,154 to $2,084 per tonne. In New York, prices were slightly down from $2,401 to $2,389 per tonne.
The downturn trend in prices was attributed to an aftereffect of concerns that rising prices of energy in Europe together with a steady climb in the inflation rates could curb cocoa demand in the region.
On a positive note, prices reverted from their descent towards the end of the month under review on both sides of the Atlantic and ended the month bullish during the last five trading days. In London, prices averaged $2,094 per tonne and ranged between $2,091 and $2,095 per tonne, while in New York, the average settlement price stood at $2,421 per tonne, with a minimum of $2,408 per tonne and a maximum of $2,430 per tonne.
Global supply and demand forecasts for the 2021/22 season
At the end of August, the revised forecasts for the 2021/22 cocoa season published by the ICCO Secretariat in its latest issue of the Quarterly Bulletin of Cocoa Statistics (QBCS) suggested a supply deficit of 230,000 tonnes.
According to the report, global production is expected to plunge by 6.8 percent to 4.890 million tonnes. In Africa, production is projected to drop by almost 9.9 percent to 3.655 million tonnes.
However, in the Americas as well as in Asia and Oceania, crop output is anticipated to increase by 3.6 percent to 969,000 tonnes and by 5.1 percent to 266,000 tonnes, respectively.
Meanwhile, grindings are expected to expand to 5.071 million tonnes, up by 73,000 tonnes, representing a 1.5 percent increase compared to the revised estimate of 4.998 million tonnes for the 2020/21 cocoa season.
The ICCO predicted that processing activities will expand by 2.2 percent to 1.847 million tonnes in Europe, whereas a growth of 3.9 percent to 1.091 million tonnes was projected for Africa.
In the Americas, processing activities are forecast to decrease by 0.8 percent to 966,000 tonnes, while grindings are anticipated to be flat at 1.167 million tonnes in Asia and Oceania, compared to the level attained during the previous season.
Europe/US Exchange-licensed warehouses record higher beans stock
The ICCO report showed that total stocks of cocoa beans in Exchange-licensed warehouses grew higher year-over-year on both sides of the Atlantic.
At the end of August 2022, total stocks in Exchange-licensed warehouses in Europe amounted to 187,035 tonnes, up by 9 percent compared to the volume of 171,869 tonnes posted a year ago.
Similarly, stocks of cocoa beans in licensed warehouses in the US were up by one percent to 368,589 tonnes year-on-year.
According to the report, the share of certified stocks of cocoa beans in August 2022 is by far larger in Europe with 80 percent or 150,413 tonnes compared to the United States which recorded 11 per cent or 40,521 tonnes. The figures, ICCO explained, indicate that while the London cocoa futures market is mainly for hedging activities, its equivalent in New York is mostly for speculative operations.
The ICCO observed that the current high level of stocks in Exchange-licensed warehouses could signal relatively ample carryover stocks of cocoa beans at the end of 2021/22 crop year which is drawing to a close.
A breakdown of stocks of cocoa beans held in European Exchange-licensed warehouses showed that 48 percent or 73,050 tonnes originated mainly from Nigeria, 33 percent or 50,330 tonnes originated from Cameroon, 14 percent or 20,590 tonnes were from Côte, while Guinea accounted for three percent or 5,290 tonnes.
On the other hand, certified stocks in the US were mainly of neighbouring Latin American countries as 43 percent or 23,644 tonnes originated from Ecuador, Côte d’Ivoire accounted for 37 percent or 20,589 tonnes, eight percent or 4,547 tonnes originated from Nigeria, while Peru accounted for five percent or 2,897 tonnes of cocoa beans stocks.