Cocoa surplus and pandemic conditions see sector concerns, as market prices fall
The ICCO (International Cocoa Organisation) has released its latest market report, as it notes an issue with a surplus of supplies and the ongoing covid pandemic impacting negatively on cocoa prices, reports Neill Barston.
As the Ivory Coast-based industry body’s latest study revealed, prices on both the London and New York futures cocoa commodity market were trading down against the previous year’s results.
The ICCO confirmed that nearby contract prices averaged US$2,343 per tonne, down by 7% compared with the average price of US$2,516 per tonne for the first position contract seen a year earlier in London.
Meanwhile, in New York, nearby cocoa contract prices averaged US$2,528 per tonne in January 2021, 6% lower compared to US$2,675 per tonne recorded over the same period of the previous crop year.
The situation has been compounded by reports revealed by Reuters last month, in which it was revealed that around 150,000 tonnes of beans (representing 9% of the typical harvest), had yet to find a buyer, when typically it would have had no trouble in selling its complete stock, which in turn has weakened prices.
This season in Ivory Coast and Ghana, the two nations’ governments have overseen the introduction of the Living Income Differential, a $400 a tonne premium paid by manufacturers to assist farmers gaining a sustainable wage. However, according to industry observers, weakened demand amid the pandemic is believed to have impacted on the implementation of the scheme, with overall cocoa prices coming under pressure.
In addition, the ICCO report also showed that cocoa butter prices followed a downward trend, while the opposite occurred for cocoa powder, which appeared to buck the negative trend.
According to the latest analysis, demand for cocoa powder is on the increase; thereby contributing to prices rising. In cocoa processing, if the quantity of powder manufactured increases, so do butter stocks. Thus, the lower demand for butter and increased butter stocks have led to price declines.
Compared with the average prices recorded during January 2020, cocoa butter prices went down by 25% in Europe and by 22% in the United States during January 2021. They dropped from US$6,824 to US$5,149 per tonne in the United States, while in Europe they shrank from US$6,549 to US$5,107 per tonne.
Contrary to cocoa butter price movements, compared to the levels reached in January 2020, cocoa powder prices rallied on both markets. In January 2021, powder prices went up by 68% from US$2,207 to US$3,709 per tonne in the United States and rose by 56% from US$2,067 to US$3,227 per tonne over the same period in Europe.