06.06.2023 – Chocolate lovers must now be very strong: The prospects of rising prices have once again strengthened. We provide a brief update on this interesting traders market.
You rarely see such a stable chart tunnel: Cocoa is working its way inexorably upwards, here is the weekly view. There has been a lot of news in the past weeks – most of them bullish.
Last Wednesday, for example, the International Cocoa Organization (ICCO) released its Quarterly Bulletin of Cocoa Statistics. According to the report, output in the current 2021/22 season will fall 6 percent to about 4.9 billion metric tons. At the same time, the volume processed at mills will increase by 2 percent to 5.05 billion metric tons, it said. The gap would be filled by inventories, which are expected to fall by about 9 percent, he said.
Bullish news from the ICCO
The organization cited bad weather and disease as reasons for the falling crop. We add: Farmers are plagued by what is known as Cocoa Swollen Shoot Virus Disease (CSSVD). In addition, a fertilizer shortage in the wake of sanctions against Russia will reduce supply, according to the ICCO. Demand is picking up in part because airports have reopened after Corona, he said – where a lot of chocolate is sold. The ICCO includes 22 exporting countries and 21 importers.
Nigeria and Ivory Coast supply less
According to the Barchart.com website, the Cocoa Association of Nigeria reported in late April that exports were down 42 percent month-over-month and 34 percent year-over-year in April. Nigeria is the world’s number five producer.
Also, Côte d’Ivoire reported a decline of minus 4.6 percent year-on-year in the commodity sent to ports by farmers, “Barchart.com” explained. Most notably, Ivory Coast’s Ministry of Agriculture said that the mid-crop, which is the smaller crop that began in April, will likely fall 25 percent year over year to 450,000 tons.
Bearishe news was rather scarce. In mid-May, news hit the market that inventories in U.S. commodity warehouses, as counted by ICE, had risen to a seven-and-a-half-month high. In Europe, too, warehouses were fuller than they had been in nearly eight months.
Rising demand
Meanwhile, demand continues to pick up: At the end of April, the National Confectioners Association had reported a 2.4 percent month-over-month increase in processing for the first quarter in North America – with the year-over-year figure showing a 4.4 percent drop. However, the Cocoa Association of Asia reported a 4.1 percent year-over-year increase in processing. By mid-April, the European Cocoa Association had already reported a 0.5 percent year-over-year increase in mills for the first quarter. That doesn’t sound like much, but Europe reported the strongest first quarter consumption since 1999.
The conclusion from all this is that there is currently a lot to be said for the continuation of a bull market. Whether long or short – Bernstein Bank wishes successful trades and investments!
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