Market Briefing: Cocoa – 03 June 2021

Global cocoa surplus of 178,000 tonnes estimated for 2020/21
Ivorian cocoa production projected at 2.2 million tonnes this season
Global 2021 cocoa grind expected to rise by 1.2% to 4.7 million tonnes
Cocoa futures down 8.2% since the start of 2021, losing USD214/tonne

Production

The 2020/21 cocoa season is now estimated to see a global cocoa surplus of 178,000 tonnes, up from a IHS Markit’s recent estimate of 99,000 tonnes. Global production is now also placed at 4.9 million tonnes, from IHS’s prior estimate of 4.8 million tonnes. IHS Markit also increased its Ivorian cocoa production estimate to 2.2 million tonnes from 2.1 million forecast previously. In addition, the production forecast for Ghana, was increased by 80,000 tonnes to 930,000 tonnes.

Brazil’s cocoa output dropped to its lowest level in over a decade, producing 3 million 60-kilo bags (166,532 tonnes) in 2020/21, down 16% y/y. In the state Bahia, total production in the past crop-year plunged to its lowest level on record to 2 million 60-kilo bags (95,455 tonnes), a 19% y/y decrease.

Demand

IHS Markit also revised its 2021 cocoa grind estimate, now expected to rise by 1.2% to 4.72 million tonnes, compared to a 0.3% decline expected in earlier forecasts. This, along with the increased surplus, has also resulted in changes for the ending stocks to grind ratio, now expected to rise to 40.4%, up from 37.1% in 2019/20.

Ivory Coast cocoa grinding could drop by 40% to 25,000 tonnes in May, and to 20,000 tonnes in June, due to power shortages, according to exporters’ association GEPEX. Cocoa grinding reached 42,000 tonnes in April, down 8.7% from 46,000 tonnes last season. Cumulatively from October 1 to the end of April, grinders processed 335,000 tonnes of beans, up from 328,000 tonnes last season.

In its Q1 financial results, Mondelez noted confectionary demand growth of 10% y/y in emerging markets and 7% for the last two years.

Trade

Exports of Ecuadorian cocoa beans and semi-finished products reached 101,605 tonnes in the first four months of the year, rising by 10.7% y/y. In April alone, Ecuador exported just over 20,000 tonnes compared to 22,000 tonnes the month prior and 24,000 tonnes on average over January and February.

April’s average exchange certified cocoa stocks increased by 22% m/m in Europe, while a 13% m/m rise was recorded in in the US, outlined the ICCO. European warehouses averaged 106,075 tonnes, up by 4% compared to their average level of 101,801 tonnes in April 2020. In the US, total stocks increased by 14% y/y to reach an average of 302,765 tonnes in April 2021.

A fifth of cocoa purchases by multinational companies in Ivory Coast must be fulfilled by local firms in an effort to improve competition, according to a new government decree.

Price

Cocoa prices are down 8.2% since the start of 2021, losing USD214 and totally missing the inflation boat that has buoyed countless commodities from soybeans to copper and lumber.

In May alone, cocoa prices were again mostly in a slump, with a 5½-month low at the start of the month, as New York fell to USD2,369 a tonne. On May 17, prices hit a two-month high of USD2,539. Though since then, prices have continued to falter, as New York slipped to a three-week low on May 25 to USD2,380.

Meanwhile, average cocoa butter prices in April dipped by 15% y/y in Europe to USD4,839 per tonne and by 11% in the US to USD5,025 per tonne, said the ICCO. In contrast, cocoa powder prices rallied by 55% to USD4,251 per tonne in the US and by 44% to USD3,381 per tonne in Europe.

(IHSmarkit)