Latest ICCO results reveal cocoa market instability amid concerns over West African oversupply
Cocoa farming in Ghana and Ivory Coast remains a key industry (pic, ICAM)
The latest monthly figures from the International Cocoa Organisation (ICCO) have revealed further market instability in the sector, as commodity values continue to fluctuate amid concerns regarding over-supply in key West African markets, writes Neill Barston.
As the industry body recently revealed, core markets of Ivory Coast and Ghana are facing a challenging situation with excess supply a key factor in impacting on prices of the key ingredient for the chocolate market.
Trading conditions have remained complicated in the region, with the Ivorian government having reduced direct payments to farmers in April by 25%, while the ‘farmgate’ price paid to neighbouring Ghana was in fact maintained, as its crops performed consistently, with its mid-crop results showing a 12% increase, with reported assistance measures from the country’s government.
Consequently, reports from Bloomberg recently reported that Ghana had recorded its best harvest for a decade, at 965,493 metric tonnes in early June, with farmers seemingly on course to benefit from the freshly introduced Living Income Differential payments of $400 per tonne of cocoa that the Ivory Coast and Ghanaian governments heralded last autumn as a key solution to raising farmer payments to sustainable levels.
Significantly, in May the ICCO had forecast global record cocoa production of 5.024 million tonnes for the 2020/21 season, marking the first time the 5 million mark has been broken – yet demand has reportedly been inconsistent in regions around the world during the past year amid the pandemic.
According to the organisation, record productions are expected in Ivory Coast and and Ecuador following conducive weather conditions in cocoa producing areas. Despite an expected increase in world grindings, a production surplus of 165,000 tonnes is currently anticipated for the crop year under review.
Furthermore, in terms of share of total world production, the ICCO noted that Africa is expected to remain by far the largest cocoa producing region, accounting for 77% of world cocoa output. The shares of the Americas and Asia and Oceania are likely to be 17% and 6% respectively.
The group’s latest monthly data reflected the market uncertainty, with values experiencing a notable dip in the middle of the month, before recovering slightly towards the end of July. The prices of the nearby cocoa futures contract averaged US$2,195 per tonne and ranged between US$2,122 and US$2,295 per tonne in London whereas in the other key trading centre of New York, average price of the first position contract was higher, standing at US$2,332 per tonne, seesawing between US$2,242 and US$2,425 per tonne.
Underlining this picture, in Europe, 7,960 tonnes of cocoa beans were exchanged against the JUL-21 contract, down from the 9,280 tonnes tendered against the JUL-20 one.