Cocoa prices have experienced a significant surge, with contract prices in major trading hubs London and New York posting double-digit percentage gains in March 2024, according to the latest market review by the International Cocoa Organization.
The report from the International Cocoa Organization, Market Review, March 2024 shows a steep escalation in prices has been driven by a notable decline in production from Côte d’Ivoire and Ghana, which together account for approximately 54% of global cocoa production.
This downturn in output has heightened concerns about global cocoa supply shortages and spurred dramatic price rallies in the commodities market.
As of the end of March 2024, the price for the nearby contract in London skyrocketed by 47% to US$10,455 per tonne, while in New York, it rose by 44% to US$9,729 per tonne. This contrasts sharply with the relatively stable price increases recorded during the same period last year.
The current market conditions are characterized by a ‘backwardation’ structure, where the prices for immediate delivery are higher than those set for future delivery, underscoring the urgent demand and tight supply in the market. The MAR-24 contract, which expired mid-month, saw prices climbing significantly after its expiry.
Market analysts attribute the production shortfall in Ghana to structural issues, including widespread disease in cocoa trees, illegal mining activities reducing farmable land, and ageing plantations. These factors suggest a prolonged challenge for Ghana’s cocoa output, with a negative production trend identified since the 2016/17 season.
Conversely, in Côte d’Ivoire, the production shortfall appears to be a short-term anomaly, despite 25% to 30% of farms being affected by the Cocoa Swollen Shoot Virus Disease (CSSVD). Analysts predict a potential recovery in Ivorian cocoa production in the medium term, barring further complications.
With the 2024/25 cocoa season on the horizon, the market is now looking towards the new grindings data expected in the upcoming weeks, which will provide early indicators of the potential market balance for the next year.
The sharp increase in cocoa prices and ongoing supply issues highlight significant challenges and uncertainties within the global cocoa market, affecting everything from chocolate production to economic conditions in key producing countries.
Source: Norvanreports