Cocoa Prices Rally on West African Weather Concerns

Cocoa Market Overview - Cocoa prices experienced a significant rally, with December ICE NY cocoa closing up 3.02% and London cocoa up 2.15%, reaching a 1.5-week high due to weather concerns in West Africa [1] - Heavy rainfall in the Ivory Coast has hindered farmers' access to cocoa fields, while dryness in Ghana and Nigeria has negatively impacted crop conditions [1][6] Supply and Inventory Dynamics - ICE-monitored cocoa inventories in US ports have decreased to a 4.25-month low of 2,092,823 bags, supporting higher cocoa prices [3] - Cocoa exports from the Ivory Coast have shown a slower pace, with shipments totaling 1.82 million metric tons (MMT) this marketing year, reflecting a 5.8% increase from last year but a decline from a previous 35% increase [3] Quality and Production Concerns - Quality issues regarding the Ivory Coast's mid-crop cocoa are contributing to price support, with an estimated mid-crop of 400,000 MT, down 9% from last year's 440,000 MT [7] - Nigeria's cocoa production is projected to decline by 11% year-on-year to 305,000 MT for the 2025/26 crop year, which may also support cocoa prices [8] Demand Trends - Weak global cocoa demand has been a bearish factor, with European cocoa grindings falling 7.2% year-on-year and Asian grindings down 16.3% year-on-year, marking the smallest Q2 amount in eight years [9] - In contrast, Ghana's cocoa production is expected to increase by 8.3% year-on-year to 650,000 MT, which could exert downward pressure on cocoa prices [10] Future Projections - The International Cocoa Organization (ICCO) has revised its global cocoa deficit for 2023/24 to 494,000 MT, the largest in over 60 years, while forecasting a surplus of 142,000 MT for 2024/25 [11]