The World Cocoa Foundation (WCF) received an unexpected fillip ahead of its Partnership Meeting in Brazil later this month, with news that the International Cocoa Organization (ICCO) expects a global cocoa supply surplus of 142,000 tonnes for the 2024-25 season.
After three consecutive years of global cocoa bean production deficit, many analysts expected a fourth deficit, which would keep pressure on demand and prices high.
Michel Arrion, executive director of the ICCO, told cocoaradar.com the reviewed forecast, released on 28 February in its latest quarterly bulletin, was a “provisional” estimate of a surplus.
Anthony Myers
He explained that the revised figures were compiled with fresh data regarding “very good numbers concerning recent port arrivals in exporting countries, which indicate an increase in cocoa supply.”
This fact, coupled with announcements in importing countries of chocolate brands that are increasing their prices (compounded with shrinkflation), will also reduce the demand for cocoa, easing supply tensions.
Arrion said he knows that other analysts are predicting a smaller surplus (but not a deficit). The ICCO’s price forecasts remain high, as cocoa bean stocks are down in warehouses, and grindings remain relatively low. The organization reviews its forecasts quarterly, with the next due in May.
Regarding the critical WCF Partnership Meeting in São Paulo, Brazil on 19 to 20 March, Arrion said: “The message will be: ‘it is too early to draw conclusions on the mass balance of this crop year - a lot will depend on the mid-crop that will start on 1 April’.”
Challenges ahead
March weather is crucial for farmers growing mid-crops, but many in West Africa are still concerned about lower-than-average rainfall for this time of year.
The 2024-25 season is now envisaged to be better than the 2023-24 season despite the challenges faced by producers, which include, but are not limited to, weather conditions, diseases, pests, ageing trees and other costs.
The ICCO said high cocoa prices over the past several years have incentivized farmers to invest more effort and resources in cocoa farming despite their challenges.
Compared to the 2023-24 season, global cocoa supply is anticipated to increase by almost 7.8% to 4.840 million tonnes. Global cocoa demand is projected to decrease by nearly 4.8% to 4.650 million tonnes.
Cocoa prices today plummeted to 3-1/2 month lows this week after the ICCO bulletin. According to ICE Futures data, exchange prices for cocoa beans fell by about 11%, or $1,000, to $8,100 per tonne on Monday.
New York cocoa futures market 'disconnected'
Tricia Brannigan, Hershey's vice president for procurement, told Reuters that she believes the New York cocoa futures market is currently disconnected from the reality of the global physical market due to exchange actions that have reduced liquidity and increased volatility.
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"ICE is not providing an orderly market for buyers and sellers," she said, claiming that the cocoa futures market is no longer providing price transparency or helping companies to hedge risks.
"The (futures) market is not functioning properly. Commercial players are leaving the market," she told Reuters.
While ICE has yet to respond to her comments, she referred to the chocolate companies and commodities traders who typically use futures to reduce risks from price swings.
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