Cocoa demand will outstrip supply

In a cocoa market report released by the International Cocoa Organization (ICCO), they predict that demand will outgrow supply. Using the stock-to-grindings ratio, the organisation explained that a higher stock-to-grindings ratio will result in lower cocoa prices, while a lower stock-to-grindings ratio results in higher cocoa future prices. Lower values for this ratio reflect “scarcity” of cocoa beans which contributes to rising prices.

A supply deficit is expected for the 2021/2022 season, but cocoa prices have decreased due to economic uncertainties. Following on from the pandemic, the global cocoa market was expected to end the 2020/2021 cocoa year with an excess supply.

In June of this year, prices averaged at US$2319 per tonne, ranging between US$2059 and US$2215 per tonne in London. Cocoa future prices decreased, plummeting by 6% in London and 8% in New York. This was driven by strengthening of the US dollar, global economic concerns from inflation and a high level of inventories in monitored stocks of cocoa beans. Certified stocks of cocoa beans increased from 171,330 tonnes to 175,740 tonnes in Europe.

On June 19, levels of arrivals in the Ivory Coast and purchases in Ghana continued to be lower: reporting 1.943 million tonnes, which was 5% lower than a figure of 2.045 million tonnes at the same time last year. Cocoa purchases were down 32% in GHana, from 961,000 tonnes the previous year to 651,000 tonnes.

The report noted that average temperature, cumulative rainfall and average soil moisture in cocoa growing areas in the Ivory Coast and Ghana may not have contributed to the low level of arrivals and purchases. Other parameters like ageing cocoa trees, cocoa-related diseases and poor agricultural practices may have had a part to play in reducing the yield of cocoa farms and consequently reducing the level of arrivals and purchases in these two countries.

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