Ghana and Ivory Coast cocoa prices surge to ’46-year high’, as concerns remain over supply deficits

Cocoa prices for key Ivory Coast and Ghana crops have continued to show notable increases this past month that have been put at reaching a 46-year high on London and New York markets, owing to continued uncertainties surrounding ongoing concerns over supply deficits, writes Neill Barston.

In the UK, prices on the futures platform stood up 1.3% to £2,572 per tonne for September stocks, which according to figures from Reuters, has not been seen since 1977, leading to broader industry concerns that the price of chocolate in particular is likely to rise in response to conditions.

According to the latest report from the International Cocoa Organisation (ICCO), its studies reveal that the sector believes the availability of cocoa from the two West African nations may continue to experience challenges in the forthcoming months in the wake of adverse growing conditions, compounded by inflationary pressures faced by farmers that has led to significantly higher fertiliser costs that has also impacted potential yields.

However, the organisation asserted that a number of international media reports of a ’46-year high’ in prices were wide of the mark, and accounting for inflation, were actually closer to being a six-year high in real terms in its view.

The issue is likely to be among one of many key topics for this year’s World Confectionery Conference, which will be taking place at the Harrogate Convention Centre in Yorkshire, UK, on October 5 (see our dedicated website for details  and make the most of our final Early Bird rates through contacting sales manager Chris Meer at [email protected] by 5 August).

Significantly, throughout June, trading remained bullish, with prices clearing the historic watermark US$3,000 per tonne mark, on both the London and New York markets compared to the situation seen back in June 2022 – which had seen a downward trend in values below $2,500 per tonne, which in turn, was placing particular strain on farming communities, as they were receiving even less for their labours.

As the ICCO reported, in Europe, cocoa beans originating from Ghana and Ivory Coast traded with the highest premium followed by Ecuadorian and Nigerian cocoa beans; while in the United States African origins received a higher premium compared to Ecuador.

From a geographic perspective, West Africa is closer to Western Europe compared to North America and Asia. Consequently, shipment costs are expected to be lower for close destinations and higher for longer distances.

In terms of the location-specific quality differential being paid for crops on global markets, in Europe, the level for Ghanaian cocoa stood at US$497 per tonne in June 2023, up by 45% compared to US$344 per tonne recorded in June 2022. As the ICCO’s latest figures noted, the origin differential went up by 67% from US$240 to US$402 per tonne and by 13% from US$370 to US$418 per tonne for Ivorian and Ecuadorian cocoa beans, respectively. The premium applied to Nigerian cocoa beans increased from US$93 to US$238 per tonne.

The higher premium applied to African origins in the European market thus appears as a reward for quality, whereas the premium for Ecuadorian cocoa in Europe covers freight rates, which are in part due to the relatively long shipping distance between Latin America and Europe. In the USA, the premiums applied to cocoa beans originating from Africa were substantially higher than for Ecuadorian cocoa beans.

This suggests that the US market currently attracts Africa origin cocoa through competitive premiums compared to Europe. In summary, during June 2023, the high premiums applied referred to the prices of the DEC-23 contract on both the London and New York markets and resulted from a combination of several factors including uncertainties about the expected supply and quality of the cocoa beans, as well as market incentives to attract quality cocoa from distinct cocoa origins.

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