Cocoa prices stumble on ICE amid production spike

Cocoa prices on the ICE recorded an overall bearish stance in March despite recording a production surge. Dealers said the decline was driven by various factors including; the announcement of new lockdowns in Europe in response to the third wave of the COVID-19 pandemic, which has been harmful for the global economy and detrimental to cocoa prices. On the other hand, production in Côte d’Ivoire and Ghana were reported at higher levels compared to the preceding season.

Over the first half of March, prices of the MAR-21 contract plummeted by 5% from $2,698 to $2,550 per tonne in London and by 8 per cent from $2,736 to $2,512 per tonne in New York.

Over the same time span in New York, the nearby cocoa contract averaged $2,693 per tonne in March, representing a 1% drop compared to $2,667 per tonne recorded over the same period of the previous crop year.

Thereafter, from March 17 onwards, the first position contract (MAY-21) prices continued to depreciate over the second half of the month. In London,a 3 per cent plunge to $2,337 was recorded while in New York prices tumbled by 6 per cent to $2,354 per tonne.

Stocks with valid certificates in European warehouses averaged 95,321 tonnes in March, representing 63 per cent of total certified stock to maintain a modest movement compared to their average level of 108,991 tonnes seen in March 2020.

For the U.S., certified stocks moved up from an average of 5,101 tonnes in March 2020 to 41,680 in March 2021. It is worth noting that 52,860 tonnes of cocoa beans were tendered against the MAR-21 contract in Europe.

This volume is by far higher compared with the 6,130 tonnes physically delivered against the MAR-20 contract a year ago. Dealers said this is an indication that grinders prefer to source their cocoa from non-LID origins. During the main crop of 2020/21, cocoa graded by the ICE Futures Europe reached 74,140 tonnes, up from 71,130 tonnes of cocoa graded over the same period of the previous season.

Over the period October 2020 – March 2021, the ICE Futures U.S. graded 47,731 tonnes of cocoa beans, up from 10,747 tonnes graded during the same period of the preceding year.

Following the above-mentioned periods, the shares of Cameroonian cocoa beans at exchange gradings dropped from 68 per cent to 35%. On the contrary, the share of Ivorian and Nigerian cocoa beans rose from 15% to 26% and 15% to 36 per cent respectively while the gradings share of cocoa from other origins moved up from 2% to nearly 4%.

Focusing on the European market, the differential over Ghanaian cocoa stood at $488 per tonne in March 2021, down by 27% compared to $672 per tonne recorded in October 2020. Similarly, the origin differential declined by 44% from $527 to $295 per tonne for Ivorian cocoa beans. A 59% plunge from $390 to $161 per tonne was recorded for the Nigerian cocoa country differential, while Ecuador’s differential fell slightly from $472 to $415 per tonne.

In turn, cocoa of Ghanaian origin recorded on the U.S. market a differential of $566 per tonne in March 2021 against $614 per tonne during October 2020. Over the same period, the premium applied to Ivorian cocoa beans plummeted by 17% from $481 to $398 per tonne. Premiums received for Ecuadorian beans in the U.S. dropped by 19 per cent from $231 to $187 per tonne, while a 15 per cent reduction from $407 to $348 was seen in the origin differential for Nigeria.

On the contrary, prices of cocoa powder were higher compared to their values recorded 12 month ago. They soared on both markets, up by 56 per cent from $2,573 to $4,007per tonne in the United States in March 2021. Over the same period in Europe, powder prices jumped by 35 per cent from $2,408 to $3,248 per tonne.

As at 11 April 2021, cumulative cocoa arrivals at Ivorian ports for the 2020/21 cocoa year were estimated at 1.718 million tonnes, up by 2.8% from the level recorded over the same period last season.

The country’s exports of cocoa beans during the period October 2020-February 2021 amounted to 882,852 tonnes, down by 12 per cent year-onyear. Ivorian cocoa processors posted data showing that, at the end of March 2021, cocoa grindings had increased by 3.9% year-on-year from 282,000 tonnes to 293,000 tonnes.

In Ghana, purchases of graded and sealed cocoa beans were reported at 748,162 tonnes, representing a 12.6% increase from 664,328 tonnes recorded a year earlier.