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0 News Ghana, Latest Updates and Breaking News of Ghana, Roger A. Agana, https://newsghana.com.gh/cocoa-prices-rise-amid-supply-concerns-and-weather-challenges/
Cocoa futures saw a significant surge in December 2024, with prices soaring on both the London and New York markets. By the end of the month, cocoa prices in London had increased by 66%, from US$6,896 per tonne on October 1, 2024, to US$11,441 per tonne on December 31, 2024.
Similarly, New York prices rose by 64%, from US$7,061 per tonne to US$11,545 per tonne during the same period. This upward trend is primarily attributed to weather conditions in the world’s top cocoa-producing countries, which are currently in the dry season. With hot temperatures and minimal rainfall, particularly in Côte d’Ivoire and Ghana, there are growing concerns that the 2024/25 global supply of cocoa beans may be negatively impacted.
In Côte d’Ivoire, arrivals of graded and sealed cocoa beans at ports were up by 27.4% by December 29, 2024, reaching 1.054 million tonnes, while Ghana reported a 57.7% increase in cocoa beans by December 12, 2024, with 366,075 tonnes. Despite these higher arrivals, the severe dryness in these regions has raised concerns over potential production shortfalls, contributing to the ongoing price increases.
While La Niña conditions have emerged, their effects are yet to be seen in West Africa. Typically, La Niña brings cooler temperatures and more rainfall, but such weather patterns have not yet materialized. Additionally, the harmattan winds that began in December are further exacerbating the situation. With uncertain weather conditions persisting, there is a real risk that the 2024/25 cocoa season could see a fourth consecutive deficit in supply.
The cocoa market’s price structure further illustrates the ongoing supply tightness. In the first half of December 2024, the London market experienced backwardation (where nearby contracts traded at higher prices than future contracts), reflecting concerns about a sharp decline in West African supplies. In contrast, the New York market, which sources a significant portion of its cocoa from Latin America, remained in contango (where nearby contracts are cheaper than future contracts), due to stable supply prospects from the region. However, both markets shifted into backwardation by mid-December, signaling continued supply constraints for both the main and mid-crop outputs.
On the demand side, the rising cost of cocoa is already impacting chocolate manufacturers, with companies such as Lindt & Sprüngli announcing price hikes in response to soaring cocoa prices. As of mid-January 2025, data from key cocoa associations revealed a year-on-year decline in cocoa grindings for the fourth quarter of 2024. The European Cocoa Association (ECA) reported a 5.4% reduction to 331,853 tonnes, while the Cocoa Association of Asia (CAA) saw a slight decrease of 0.52% to 210,111 tonnes. North America’s grindings data is yet to be released. This decline in grindings suggests that demand for cocoa is weakening, which could eventually impact the overall market.
The persistent rise in cocoa prices is likely to continue as long as supply constraints persist. However, if demand continues to decline due to higher prices, the market may eventually find an equilibrium. With a projected fourth consecutive supply deficit for the 2024/25 season, it seems cocoa prices will remain high unless there is a significant improvement in production or a rebound in demand. For now, the market is poised to navigate through this challenging period marked by tight supplies and uncertain demand dynamics.
News Ghana, Latest Updates and Breaking News of Ghana, Roger A. Agana, https://newsghana.com.gh/cocoa-prices-rise-amid-supply-concerns-and-weather-challenges/
