Photo by Rodrigo Flores on Unsplash
 

Cocoa, as well as Orange Juice Concentrate, retain their favorable price dynamics outlook, and newly emerging factors keep contributing to the strengthening bullish trend. Yesterday, on April 4, May New York cocoa CCc1 rose 1.6% to $2,912 a ton. In contrast, May London cocoa, LCCc1, rose 0.8% to 2,138 pounds a tonne, with gains curbed by the strength of sterling as the British currency rose to a 10-month high against the dollar. The contracts are still up 11% this year. 

Among the most recent developments since we wrote our previous cocoa flash note on March 27, much of the Ivory Coast's cocoa-growing region has seen below-average rainfall over the past week, coupled with favorably sunny weather, looked at first as providing good conditions for the start of the April-to-September mid-crop. Côte d'Ivoire's cocoa regulator extended the window for exporters to buy allocated amounts of mid-harvest cocoa beans to ease market concerns about shortages that have pushed commodity prices to three-year highs.

The so-called mid-harvest cocoa, which starts on Saturday, is usually of lower quality and is usually sold to local mills. It's the most recent action taken to allay supply concerns, after CCC, Coffee, and Cocoa Council, last month barred some international dealers from purchasing additional beans after they exceeded the contract's purchase threshold. The restriction, which is still in effect, was put in place to ensure that smaller shippers could fulfill their contractual obligations.

A common practice is to allow access to the mid-crop. Ivory Coast has enough beans to fulfill all contracts.

However, with total bean arrivals at 1.78 million tons this season compared to expectations of roughly 1.85 million tons a year ago, Ivory Coast supplies are down this season. This has contributed to the first weekly increase in cocoa futures prices above $2,900 per ton since 2020. West Africa's productivity has been decreased by unfavorable weather. There is currently a gap of around 100,000 tons between the amount covered by exporters' contracts and the amount purchased thus far. It is anticipated that the mid-crop, which is generally around 500,000 tons, would make up the difference. Yet, some purchasers worry that the secondary harvest frequently contains more beans of poor quality.
 

Summary 

Cocoa remains one of the most vulnerable and event-driven soft commodity, along with orange juice, and the most recent news suggest that Ivory Coast farmers made mid-harvest cocoa miscalculations, which is, along with CCC’-instigated supply restrictions, pointing to high chances of cocoa futures’ further price advances – at least up until September, when next crop projections will become more accurate.

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