ASHINGTON — Nearby New York cocoa bean futures hit 20-month highs in late January amid concerns about tighter global supplies even as port arrivals in top-producing Ivory Coast were ahead of the year-ago pace and fourth-quarter cocoa bean grind offered mixed signals about global demand.
The nearby March contract traded at a high of $2,859 per tonne on Jan. 22, up more than 25% from a year earlier. Futures traders have been concerned about dry conditions in West Africa, by far the world’s largest cocoa bean growing region. Prices have since backed off about 3% but remain well above year-ago levels. Deferred futures delivery months through 2021 are at a discount to nearby contracts, possibly suggesting less concern about supply next year (2020-21).
he International Cocoa Organization (I.C.C.O.) estimated 2018-19 (which ended Sept. 30, 2019) global cocoa bean production at a record 4,834,000 tonnes, up 3.9% from 4,651,000 tonnes in 2017-18 and up 10% from the prior five-year average. The I.C.C.O. has not issued its 2020-21 forecast.
Traders indicate cocoa powder users, including bakers, baking mix and chocolate milk mix manufacturers, are well covered through the first half of 2020 and mostly well covered in the second half of the year, although some large sales still were noted for the July-December period in late January. Many buyers also have at least some coverage into 2021. Lower futures values may offer mixed signals, encouraging some buyers to lock in coverage to take advantage of the discount but prompting others to wait amid a lack of upside price urgency.
Some buying urgency may have been dampened as prices for 10% to 12% natural cocoa powder and certain other grades have weakened about 4% since the first of the year. Cocoa butter prices have remained firm, maintaining a constant percentage value of about 2.5 times futures (the butterfat ratio), which has made butter more valuable as futures advanced. Cocoa powder prices typically move at an inverse to butter, and powder values have weakened, presenting powder buying opportunities for some but encouraging other buyers to wait to see if prices fall more.