On Wednesday, cocoa prices rose after the Nigeria Hydrological Services Agency (NIHSA) cautioned of flooding in Nigeria’s cacao-growing areas.
US cocoa July futures advanced 5.49% to $11,017.00 per metric ton (MT) on April 24, rebounding from a two-day crash. Furthermore, market analysts expect a 3.22% gain to $11,372.00 per MT on the coming trading day.
This week, the commodity posted the highest 60-day volatility since 1977, highlighted by the 9.39% upward swing on April 18. According to industry specialists, the instability is caused by traders’ concern that extreme price spikes may cause demand to plummet.
Last year, abnormally heavy rains in West Africa accelerated the spread of cacao tree diseases, devastating harvests. As a result, cocoa prices soared by 61.38% throughout 2023 from 2022’s closing price of $2,600.00 and 162.56% year-to-date.
So far this month, the main chocolate raw material’s prices widened by 12.81%, including a 7.25% slide this week. The soft commodity closed above $11,000.00 resistance for the first time on April 15, with speculators eyeing $12,800 as the next price barrier.
Top cacao grower Ivory Coast shipped 1.33 MMT of cocoa to ports from October 01 to April 21, 30.00% lower than the same period the year before. Ghana, the world’s second-largest producer, estimates an annual crop of 423,750.00 MT, less than half its initial projection.
NIHSA Fears Disruption in Cocoa Crop Operations
NIHSA announced that it expects severe weather to impact many critical cocoa-producing states in Nigeria, the world’s fifth-largest producer. The agency advised farmers to prepare countermeasures to protect their crops from extreme rainfall and potential flooding.
In addition, it warned that even if the farmers successfully safeguard their produce, infrastructural damage may hinder their sales. Hence, NIHSA called for state governments to reinforce their water management systems to prevent transportation disruptions in goods and materials.
NIHSA encouraged Nigeria’s national government to support the development of more resilient strains of cacao trees. Lastly, it reassured that with the right preparations, Nigeria can avoid contributing to the worst cocoa shortage in 40 years.
