Cocoa outlook improves as El Niño StrengthensCocoa continued its upward price trajectory, rising 3% over the prior month (22 May to 23 June 2023).
The International Cocoa Organization (ICCO) has corrected its forecast for the supply deficit on the cocoa market in the current crop year up from 60,000 tonnes to 142,000 tonnes as production is expected to be lower and grinding higher than previously expected. The production estimate was lowered by 37,000 to 4.98 million tonnes, while the grinding forecast was revised higher by 45,000 to 5.07million tonnes.
The revisions are largely due to Ivory Coast (the world’s largest cocoa producing country) where the crop is set to be 30,000 tonnes lower than the prior forecast, but still 79,000 tonnes higher than last year, resulting in a minor downward revision given the considerable year-on-year shortfall in cocoa arrivals at the ports. On the other hand, 35,000 tonnes more cocoa is set to be ground in Ivory Coast than previously predicted by the ICCO. The higher deficit is likely to push global stocks down to 1.63 million tonnes by the end of the crop year, which equates to a good 32% of annual grinding.
The last time the stocks-to-grinding ratio was any lower was 38 years ago. The cocoa price remains well supported against this backdrop. El Niño is now once again a source of concern, as prospects for the new season starting September are not bright due to the threat of dryness. In addition, recent heavy rains have been reported in major producing countries, slowing down mid-crop harvest in top supplier Ivory Coast and elevating fears of disease outbreaks.
The front end of the cocoa moved more deeply in contango, with the negative roll yield of -2.5% weighing on performance.
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