Key points:
Cocoa (Symbol: Cocoa-C) prices surged past $10,000 per metric ton driven by escalating concerns over supply shortages from major producers. The market is now focused on the worsening supply crisis, particularly in Ivory Coast and Ghana, as the top cocoa producers in the world.
The image above shows cocoa prices rallying, as observed on the VT Markets app.
Ivory Coast has halted cocoa exports for June and forward sales for the next season. This drastic measure follows reports that local processors have run out of beans, leading to fears of significant supply shortages.
The suspension of exports may extend beyond June, affecting major multinational companies like Cargill, Barry Callebaut, CEMOI, and Olam. This could force European factories relying on Ivorian beans to seek alternative sources, exacerbating the supply crunch.
Meanwhile, Ghana faces similar challenges, with plans to delay the delivery of up to 350,000 tons of beans to the next season due to poor crop conditions.
Current crop level in Ghana is not expected to exceed 500,000 tons, significantly lower than usual, which raises concerns about the country’s ability to meet future demand. Ghana sells about 80% of its crop one year forward, but it has only managed to sell 100,000 tons for the 2024/25 season.
The situation is dire, with both countries overselling their main crops and being forced to roll contracts into the current mid-crop season. The shortfall in production has led to a significant increase in cocoa prices, which have more than doubled this year.
The rising cocoa prices have broad implications for the global market. The supply crisis in Ivory Coast and Ghana shows the fragility of the cocoa supply chain.
Disruptions in major producing countries have led to significant price volatility before. For example, during the political crisis in Ivory Coast in 2010-2011, cocoa prices soared due to supply disruptions.
The current situation could have similar repercussions, with prices likely to remain elevated as the market grapples with supply shortages. Fresh production from other countries like Brazil and Ecuador will take years to come to market, indicating that the supply gap will persist in the near term.
Cocoa prices are expected to remain high due to the immediate supply shortages in Ivory Coast and Ghana. T
he market will likely see continued volatility as traders and manufacturers scramble to secure available stocks, a pattern commonly observed in the world of soft commodities trading. If production in alternative cocoa-producing countries does not increase significantly, the supply shortages could persist, keeping prices elevated.
