Cocoa futures on the New York Mercantile Exchange have surpassed record highs, breaching the $12,000 per ton for the first time.
The rise in prices has been fuelled by concerns over lower output in Ivory Coast, the largest producer of cocoa in the world.
In 2024, cocoa futures almost tripled in value as poor harvests in West Africa weighed on production.
This has also resulted in companies dipping into their reserves to fulfill market requirements.
Since mid-November, when cocoa still cost around USD 7,000 in New York, the price has risen by more than 60%.
The cocoa price in London has doubled since the end of October.
Production woes
The start to the main cocoa harvest in Ivory Coast from October was promising.
“According to exporters’ estimates, cumulative arrivals of cocoa beans in the ports of Ivory Coast up to and including Sunday are 33% higher than in the same period last year,” Carsten Fritsch, commodity analyst at Commerzbank AG, said.
“However, the previous year’s level was very low, which is why the significant increase is somewhat misleading,” he added.
There are also concerns that harvest volumes could level off in the coming months because of dry weather.
Fritsch noted:
The Harmattan winds coming from the Sahara between December and March could exacerbate the problem. Cocoa farmers in Ivory Coast are therefore expecting smaller harvest volumes in February and March.
Depleting cocoa stocks
Additionally, there are worries that cocoa stocks, which fell sharply due to record supply-deficit in the last crop year, might not get replenished in the ongoing season.
According to the International Cocoa Organisation, global cocoa stocks at the beginning of the crop year were only 1.3 million tons, the lowest level in 36 years.
Commerzbank said that the stocks-to-consumption ratio of 27% was the lowest level in 47 years.
“The buffer in the case of new supply shortfalls is correspondingly low, which increases the risk of price spikes,” the German bank said.
Moreover, there was also a liquidity squeeze as most market participants had to close their positions in view of sharp rise in costs.
Coffee prices also rise
The price of Arabica coffee was also trading near its record high of 350 cents per pound.
Prices have risen due to concerns over a poor crop in Brazil, the world’s leading producer and exporter of the coffee variety.
In addition, 79% of the current 2024/25 Brazilian coffee harvest is said to have already been sold. At the same time last year, it was only 69%.
“This means that significantly less coffee is available for sale. However, there are also signs that the prospects for the coming crop may not be quite as bad as previously feared,” Fritsch said.
Meanwhile, in Vietnam, the world’s largest producer of Robusta coffee, unseasonal rainfall has caused further delays to harvesting.
As a result, less Robusta coffee is currently coming onto the market.
Fritsch added:
In the short term, there is therefore no sign of coffee prices easing.
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