Cocoa prices hit a 46-year high on Monday as severe drought caused by El Niño ravaged production in West Africa, raising supply concerns.
US cocoa March futures soared 4.73% to $5,246.00 per metric ton (MT) on February 05, the highest since 1977. Furthermore, market analysts anticipate a 1.12% increase to $5,305.00 per MT in the coming trading session.
The soft commodity extended its winning streak to seven sessions for a total gain of 13.43%. It has lifted 23.26% year-to-date (YTD) as output dwindles in the world’s top producers.
Port arrivals in the Ivory Coast sank to 1.05 million metric tons (MMT) on February 04, marking a 34.00% year-over-year (YoY) drop since October. The world’s top cocoa producer yielded 1.26 MMT of cacao powder in the fourth quarter of last year.
In addition, fertilizer shortage in Ghana, the second-largest producer, caused output to plunge to a 13-year low of 683,000.00 MT. Accra recently reported that Ghana expects an even lower yield this year amid the uncontrollable spread of the black pod disease.
Trader activity skyrocketed amid short-term profit-taking, with the Intercontinental Exchange (ICE) reporting a 54.00% YoY increase in average daily volume for futures contracts. Similarly, total interest jumped by 68.00% YoY in January, posting a record 1.80 million lots on January 31.
West Africa Weather Crisis Boosts Cocoa Prices
The severe drought that plagued cocoa producers in West Africa for most of last year is expected to worsen this year. Industry watchers estimate that production in the region is already falling behind compared to 2023.
Farmers in the Ivory Coast said their pods are developing nicely after the intensity of the dry Harmattan wind weakened. El Niño poses a grave threat to cocoa, which is highly sensitive to warm temperatures and weather fluctuations.
However, they also fear the pods will deteriorate if it doesn’t rain in the next two weeks. Rain in the Ivory Coast’s farming areas averaged 0.50 mm last week, which is 5.60 mm below average.
