Cocoa demand, grinding data starts 2021/22 on strong note

COCOA DEMAND AND GRINDING DATA FOR THE FIRST QUARTER OF THE 2021/22 CO COA SEASON started on a positive footing in the global market as economies gradually recovered from the COVID-19 pandemic, signalling an increased consumption level and good news for traders of the soft commodity, the International Cocoa Organisation (ICCO) stated in its January 2022 report.

Grindings data published by the European Cocoa Association (ECA) showed a year-on-year expansion of 6.3 percent from 344,151 tonnes to 365,826 tonnes in grindings. The Cocoa Association of Asia (CAA) also recorded a similar year-onyear grinding surge, rising 6.3 percent from 217,546 tonnes to 231,309 tonnes.

The ICCO asserted that the oversupply and ample stocks of cocoa beans in the preceding season (2020/21) made cocoa beans relatively affordable, a factor considered to have supported manufacturers’ cost of production and consequently increased cocoa processing activities.

In contrast, the National Confectioners’ Association (NCA) in the U.S posted a 1.2 percent drop from 118,043 tonnes to 116,614 tonnes of cocoa beans grinded.

Market participants observed that the decline in grindings for the North American region was unexpected as earlier reports outlined that confectionery sales in the U.S. had increased over the fourth quarter of 2021.

Analysts said it remains unknown whether the reduction in the number of reporting grinders in North America is the sole factor that contributed to the observed reduction in the region’s grindings for the period under review.

Cocoa supply balance shifting to deficit over unfavourable weather

Since the start of the 2021/22 cocoa year, cocoa output in Côte d’Ivoire, the world’s largest producer, is reported to have overtaken last season’s level at 1.340 million tonnes, growing 1.5 percent higher in comparison to the 1.320 million tonnes recorded at the same period of the 2020/21 season.

Despite the year-on-year increase, analysts said the current meteorological conditions indicate that a drier weather, which will likely reduce the good soil moisture, is prevailing in the country’s main cocoa growing areas.

In Ghana, the recent data on purchases of graded and sealed cocoa beans posted a lower figure as output dropped 53.9 percent, from 570,000 tonnes to 263,000 tonnes as of January 6,2022.

According to the ICCO, the abrupt year-on-year decline in the Ghanaian purchases was to some extent supported by disruptions in the haulage of dried fermented cocoa in the Ashanti region, the second largest cocoa producing area in the country.

As witnessed in neighbouring Côte d’Ivoire, a lack of rainfall coupled with dry winds is also currently being experienced in the second largest cocoa producing country. This, analysts explain, is drawing concerns over the size and quality of the crop scheduled later on for the season.

Futures price movement in bearish position

During January 2022, prices of the front-month cocoa futures contract in London moved in a see-saw motion, trading between $2,238 and $2,428 per tonne and averaged $2,324 per tonne for the period, slightly lower compared to the average price of $2,343 per tonne for the nearby contract recorded at the same period of the 2020/21 cocoa year.

In New York, the average price of the March-22 contract settled at $2,547 per tonne, up from $2,528 per tonne recorded in January 2021 and ranged between $2,420 and $2,663 per tonne.

Concurrently in New York, prices of the first position of cocoa futures contract were lower on average by $44 per tonne compared to prices of the second position contract.

Despite the initial fall recorded at the beginning of January, prices of the front-month cocoa futures contract followed an upward trend on both sides of the Atlantic over the first thirteen trading days of the month under review, reaching a 4-month high at $2,428 per tonne and $2,663 per tonne in London and New York, respectively.

However, the bullish stance on prices was not sustained for long and from 20 January onwards, prices crashed by five percent on both markets, moving from $2,398 to $2,288 per tonne in London, while that of New York plunged from $,2661 to $2,526 per tonne.