December ICE NY cocoa (CCZ24) today is up +142 (+1.93%), and December ICE London cocoa #7 (CAZ24) is up +107 (+1.99%).

Cocoa prices today extended this week's rally to 1-week highs.   A shrinking of global cocoa stockpiles is underpinning prices.  ICE-monitored cocoa inventories held in US ports have been trending lower for the past 15 months and fell to a 15-year low Tuesday of 1,998,398 bags.  London cocoa also has support after the British pound (^GBPUSD) fell to a 1-month low today, boosting cocoa priced in sterling.

Also, lower cocoa production in the Ivory Coast, the world's largest producer, supports cocoa prices.  Government data Monday showed that Ivory Coast farmers shipped 12,960 MT of cocoa to ports from October 1 to October 6, down from 50,138 MT shipped the same time last year.

Last Friday, NY cocoa fell to a 4-1/2 month nearest-futures low and has been under pressure since last Wednesday when the European Commission postponed an anti-deforestation law for one year.  The legislation, previously scheduled to go into effect December 30, is aimed at curbing forest clearance in countries that send products, including cocoa, to the EU.  The postponement of the law allows certified cocoa stockpiles held at European warehouses to be used to satisfy contracts, reducing concerns that the new law would lead to the decertification of the cocoa and limiting existing cocoa supplies.

Cocoa prices have underlying support from dry conditions in West Africa that could curb the region's cocoa production.  Forecaster Maxar Technologies recently said that top cocoa-producing countries Ivory Coast and Ghana had seen a "significant decrease in shower activity" over the past month, leading to below-normal soil moisture and limited crop growth.

Cocoa also had support after Ghana's Cocoa Board (Cocobod) on August 20 cut its 2024/25 Ghana cocoa production estimate to 650,000 MT from a June forecast of 700,000 MT.  Due to bad weather and crop disease, Ghana's 2023/24 coca harvest sank to a 23-year low of 425,000 MT.  Ghana is the world's second-biggest cocoa producer, and its 2024/25 cocoa harvest begins in October.

An increase in cocoa production by Cameroon, the world's fifth-largest cocoa producer, is bearish for cocoa prices.  On August 21, Cameroon's National Cocoa and Coffee Board reported that 2023/24 (Aug/July) Cameroon cocoa production rose +1.2% y/y to 266,725.  Also, Nigeria's August cocoa exports rose by +6.8% y/y to 14,984 MT.  Nigeria is the world's sixth-largest cocoa producer.

Cocoa prices were supported by better-than-expected cocoa demand in Q2, although demand likely faded in Q3 due to high prices.  The National Confectioners Association reported on July 18 that North America Q2 cocoa grindings rose +2.2% y/y to 104,781 MT, stronger than estimates for a slight decline.  Also, the Cocoa Association of Asia reported on July 18 that Asian Q2 cocoa grindings fell -1.4% y/y to 210,958 MT, a smaller decline than expectations of -2.0% y/y.  The European Cocoa Association reported on July 11 that Q2 European cocoa grindings unexpectedly rose +4.1% y/y to 357,502 MT, versus expectations of a -2% y/y decline.  

In a bullish factor, the International Cocoa Association (ICCO) on August 30 raised its 2023/24 global cocoa deficit estimate to -462,000 MT from May's -439,000 MT, the largest deficit in over 60 years.  ICCO also cut its 2023/24 cocoa production estimate to 4.330 MMT from May's 4.461 MMT.  ICCO projected a 2023/24 global cocoa stocks/grindings ratio of a 46-year low of 27.4%.
 

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