Saxo Bank: Threat of Cocoa Shortage Keeps Prices Well Above Long-Term Average

• Cocoa prices remain well above the long-term average due to the threat of shortages caused by adverse weather and crop diseases.
• In April, cocoa prices exceeded $12,000 per metric ton, nearly five times the long-term average.
• The International Cocoa Organization (ICCO) raised its cocoa deficit estimate for the 2023/2024 season to approximately 439,000 tons.

Bratislava, August 27 (FinanceFlashNews.com) – The threat of a cocoa shortage is keeping its prices well above the long-term average, said Ole Hansen, Head of Commodity Strategy at Saxo Bank. This shortage is driven by adverse weather, crop diseases in West Africa, growing demand, and price volatility.

In April of this year, cocoa prices climbed above $12,000 (10,732.86 EUR) per metric ton, nearly five times the long-term average. After consolidating at $6,000, prices surged again in August by 17% to $7,600 (6,797.48 EUR). “The recent price increase was driven by persistent concerns about supply after the Ghana Cocoa Board lowered its crop forecast for 2024-2025 by 20% due to ongoing weather issues,” Hansen explained.

The record prices in April were also influenced by a supply revision when the International Cocoa Organization (ICCO) raised its cocoa deficit estimate for the 2023-2024 season to approximately 439,000 tons. This was attributed to a sharp decline in production in Côte d’Ivoire and Ghana due to adverse weather, low prices for farmers, and the spread of a virus affecting cocoa trees.

The main cocoa harvest in West Africa typically takes place from October to March, with a smaller harvest from April to September. Hansen noted that extreme price fluctuations over the past six months have reduced trading activity, with interest in the New York market dropping to around 133,000 contracts from an average of 300,000 in previous years.

“Lower participation reduces the market’s ability to absorb sudden surges in activity, leading to exaggerated reactions that further exacerbate the uncertain supply outlook,” Hansen concluded.

Table: Cocoa Price Trends in 2024

Keywords: cocoa, Saxo Bank, Ghana Cocoa Board, commodity prices, ICCO