ICCO highlights global slowdown in cocoa processing

Global grindings data has revealed a key slowdown in cocoa processing, attributed to higher operating costs,  inflation pressures and increased energy costs, according to ICCO figures, writes Neill Barston.

The international organisation noted that sector activity decreased for the first quarter of the 2022/23 season across Europe, South-East Asia, and North America.

Notably, the European Cocoa Association (ECA) posted data indicating a year-on-year decline of 1.7% from 365,826 tonnes to 359,577 tonnes in grindings. In turn, the Cocoa Association of Asia (CAA) posted a slight year-on-year drop of 0.2% from 231,309 tonnes to 230,806 tonnes.

In a similar vein, the National Confectioners’ Association (NCA) published a reduction of 8.1% from 116,614 tonnes to 107,130 tonnes of cocoa beans ground. Grindings for each first quarter of the previous three cocoa years represented approximately one-fourth of the respective total volumes of cocoa ground at the time.

Furthermore, the declining grindings during Q4.2022 moved in tandem with the net imports of cocoa beans and cocoa semi-finished products in the European Union whereas in the United States and Canada, net imports of cocoa beans and cocoa semi-finished products were higher year-on-year.

As Confectionery Production has noted, the cocoa sector in West Africa in particular has endured a turbulent recent trading period, with farmers struggling against a backdrop of sustained low levels of pay and increased costs for essential fertilisers that have impacted on yields.

Indeed, as the ICCO revealed, the latest trade statistics from Eurostat indicate that imports of cocoa beans and cocoa semi-finished products in the European Union were reduced by 13.1% year-on-year in Q4.2022 to 336,000 tonnes. On the contrary, the combined volumes of net imports of cocoa beans and cocoa semi-finished products of Canada and the United States increased by 10% from 180,000 tonnes in Q4.2021 to 198,000 tonnes in Q4.2022 based on trade statistics from the Global Trade Atlas (GTA).

Hence, the decline in processing activities in the United States was accompanied by an increase in the net imports of cocoa beans and cocoa semi-finished products while in the European Union, the descending trend in both grindings and net imports of cocoa beans and cocoa semi-finished products during Q4.2022 suggests a plausible shrinkage in the demand for cocoa in the whole EuroZone.

Significantly, as much as global inflationary pressures heighten concerns related to cocoa demand, grindings at origin are on the rise, despite pressures on farming communities, according to the ICCO. Contrary to the overall decline in grindings in the main consuming markets, top African cocoa growers are expected to further expand their domestic cocoa processing activities.

Notably, the organisation stated that Ivory Coast is in fact envisioning to process nearly half of the raw cocoa beans produced in the country.

The mid-crop harvest is usually processed at origin because the size and quality of the beans are respectively smaller and lower than the main crop. Additionally, the Conseil du Café- Cacao (CCC) and the Ghana Cocoa Board (COCOBOD) sell the mid-crop harvest at a discount to the multinationals for their processing activities.

So, to process 50% of the annual production, a share of the main crop has to be ground locally. Therefore, a question one could raise is whether a cocoa exporter is going to make more money by directly selling beans of bigger size and higher quality or processing part of the main crop at origin.

Furthermore, a new cocoa processing plant is scheduled to be built in Côte d’Ivoire in the course of the year, with more plants envisaged in future. It is worth noting that the grinding capacity of Côte d’Ivoire is currently estimated at over 700,000 tonnes.  In addition, the cocoa exporters’ association of Côte d’Ivoire (GEPEX) which gathers the top six cocoa processors in the country reported that grindings by its members reached 233,743 tonnes, up year-on-year by 10.8% since the start of the 2022/23 cocoa season. Concurrently, the volumes of exports of semi-finished products from Ivory Coast went up by 3.2% year-on-year from 109,000 tonnes in Q4.2021 to 112,500 in tonnes in Q4.2022.

In its conclusion, the ICCO noted that as consumers in developed countries becoming more discerning and cocoa imports in that part of the world on course to start complying with upcoming laws regarding sustainability, deforestation, child labour, traceability, etc., imports of beans for the operations of cocoa processors are likely to focus more on certain qualities other than the import volumes.

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