Cocoa market update: Supplies subside
Cocoa futures have surged 60% on the New York contract and 75% on the London contract year-to-date (rolling second contracts). This rally is partly driven by fundamental factors: after two consecutive global deficits, the consensus is that another one will follow in 2023/24. This means the market is, and will remain, very tight. In our recently published Outlook 2024: Buyers sail home on rising supplies, cocoa futures were one of the few exceptions to the prevailing price weakness we observed across many commodities. While we anticipate a moderate cooling of prices in 2024, it will not result from an improving supply picture. Instead, a decline in demand is expected to be the primary factor leading to lower prices in 2024. However, we still expect prices to remain inflated in 2024, as ongoing supply-side issues seem set to limit downside potential. In this report, we delve into the factors influencing prices in 2024 and whether current price levels are justified.
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Disease, weather, and aging trees have impacted cocoa yields and resulted in supply-side issues that have led to a mammoth rally for cocoa futures.
The global cocoa balance sheet is likely heading for its third-consecutive global deficit in the 2023/24 season.
We anticipate global grindings to decline in 2024. However, with the current stocks-to-use ratio at an all-time low, the market will remain tight.
Speculators will play a pivotal role in dictating price direction in 2024. At present, they are holding a large net long position on both London and New York.
Where to go from here
Paul JoulesCommodities Analyst Read more