Cocoa futures at the New York Mercantile Exchange are now above record levels, surpassing $12,000 per tonne for the first.
Concerns about a lower production in Ivory Coast – the largest cocoa producer in the world – has fueled the rise in price.
Cocoa futures are expected to almost triple in value by 2024 as a result of the poor harvests in West Africa.
Companies have also been forced to dip into their reserves in order to meet market demands.
Cocoa prices have risen more than 60% since mid-November when they were still around USD 7,000 per pound in New York.
Since the end of October, cocoa prices in London have doubled.
Production problems
It was encouraging to see the start of the main cocoa harvesting in Ivory Coast as early as October.
Carsten Fritsch is a commodity analyst with Commerzbank AG. He said that according to estimates from exporters, the total arrivals of cocoa in Ivory Coast ports up to Sunday were 33% more than the same period in 2013.
He added, “However the level of the previous year was very low. This is why the significant rise is somewhat misleading.”
A dry climate could also cause harvest volume to plateau in the next few months.
Fritsch noted:
Harmattan wind from the Sahara could worsen the problem between December and February. Cocoa farmers are expecting lower harvests in Ivory Coast in February and march.
Depleting cocoa stocks
There are also concerns that the cocoa stock, which was severely depleted due to a record-breaking deficit in the previous crop year, may not be replenished this season.
According to the International Cocoa Organisation (ICO), global cocoa stock levels at the start of the crop season were just 1.3 million metric tons. This was the lowest level for 36 years.
Commerzbank said that the stocks-to-consumption ratio of 27% was the lowest level in 47 years.
The German bank stated that “the buffer in case of new shortages of supply is low and increases the risk of prices spikes.”
A sharp increase in costs led to a squeeze on liquidity as many market participants were forced to close out their positions.
Prices of coffee are also rising
Arabica coffee prices were also near their record highs of 350 cents a pound.
The price of coffee has risen because of concerns about a bad crop in Brazil, which is the leading producer and exporter worldwide.
Moreover, 79% of Brazil’s current coffee harvest for 2024/25 is already sold. Last year, the figure was 69%.
This means that there is significantly less coffee available for sale. Fritsch added that there were also indications that the future crop prospects may not be as dire as initially feared.
Unseasonal rains in Vietnam, which is the world’s biggest producer of Robusta, have caused harvesting to be further delayed.
In response, Robusta coffee has been reduced on the market.
Fritsch added:
There is no indication that coffee prices will be reducing in the near future.
This article Why are cocoa prices rising? This post may be updated as new information unfolds
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