Cocoa futures on the Intercontinental Exchange (ICE) in New York rebounded above the $10,150 mark, indicating a resurgence from recent lows. This recovery comes amidst record-high spot prices, driven by concerns over the availability of premium-quality beans.
Nigeria’s Optimism:
Despite a notable 18% decline in cocoa exports year over year, Nigeria, the fifth-largest cocoa producer globally, remains upbeat about cocoa prices. With plans to enhance production, Nigerian cocoa producers are poised to capitalize on the current market conditions, projecting earnings of approximately $3 billion from their estimated output of 270,000 tons.
Global Supply Deficit:
The International Cocoa Organization forecasts a significant global cocoa supply deficit for the 2023–24 season, expecting it to soar to 374,000 metric tons—a staggering 405% increase compared to the previous season.
Factors Influencing Cocoa Prices
Pest Infestations and Production Losses:
Mealybug infestations in key cocoa-producing regions, including Côte d’Ivoire, Ghana, Nigeria, and Cameroon, have led to substantial production losses. This has exerted upward pressure on cocoa prices, with the cost per ton skyrocketing from $3,000 in April 2023 to $10,159 in April 2024.
Market Dynamics:
The Netherlands emerges as a significant destination for Nigeria’s raw cocoa bean exports, followed by Indonesia, Malaysia, and other nations. West Africa remains a dominant player in the global cocoa market, accounting for 75% of the world’s cocoa supply and generating substantial export revenue.
Environmental Challenges:
Challenges such as El Niño-induced weather anomalies, leading to adverse crop conditions and logistical disruptions, have exacerbated cocoa shortages in Ghana and Ivory Coast. Consequently, Ghana’s president has implemented measures to address declining output, including a significant increase in farmgate cocoa prices.
Additional Factors:
Rising fertilizer costs, deforestation, and illicit mining operations further contribute to the spike in cocoa prices, underscoring the multifaceted nature of the market dynamics influencing cocoa’s value.
Source: Nairametrices