Cocoa Futures Hover Around 2023-Lows

Cocoa futures traded around $3,200 per tonne, holding close to the lowest since June 2023, pressured by expectations of a record harvest in West Africa and rising stockpiles. Reports from producers in Ivory Coast and Ghana indicate that frequent rains in the main producing regions have contributed to the good formation of pods, reinforcing the prospect of a comfortable supply in the short and medium term. At the same time, certified stocks monitored by ICE at US ports continued to increase, reaching a 7.5-month high of 2,335,682 bags by March 23. Global cocoa reserves are expanding as plentiful harvests coincide with sluggish consumption, limiting the potential for a sustained short-term price recovery. Meanwhile, market participants remained cautious about logistics risks linked to the Iran war.

Cocoa futures traded around $3,250 per tonne, near the lowest since July 2023, amid an improved supply outlook and evidence of ample supplies. Reports from West African farmers indicated that consistent rainfall has boosted cocoa pod development prospects in Ivory Coast and Ghana. Earlier this month, both countries slashed the fixed farmgate price paid to cocoa farmers aiming at boosting sales after global prices fell. Slowing global demand has accelerated cocoa stockpile accumulation, pushing key producers into crisis. In the meantime, latest data showed ICE cocoa inventories rose to a 7.5-month high of 2,307,127 bags by March 18, reinforcing the scenario of greater availability. Nevertheless, dealers noted that part of this increase still reflects a cautious demand from the global industry.

Cocoa futures fell to below $3,300 per tonne, continuing a consolidation following three-week highs of nearly $3,450 on March 10, which were driven by news of large exports and geopolitical concerns. According to Reuters, local cocoa mills in Ivory Coast acquired more than 400,000 tons of export contracts within ten days of purchase resumption, signaling renewed market activity as the industry takes advantage of recent price declines. Despite this, market fundamentals remain pressured by weak demand and ample global supply. ICE certified inventories rose again, reaching a 7-month high of 2,228,827 bags as of March 11, with dealers noting that this still reflects a cautious demand from the global industry. Meanwhile, top producer Ivory Coast is is considering reforming its commodity trading system to bring the prices paid to producers more in line with international prices, in response to a sharp drop in global prices and difficulties in selling the product.