Cocoa futures hit a fresh record high on Tuesday as investors’ sweet tooth for the agricultural commodity remained strong. Cocoa prices have been finding support on growing global supply challenges, particularly in the Ivory Coast and Ghana. But experts say it will be the demand that either expands the rally or breaks it.
March cocoa futures rose $16.00, or 0.31%, to $5,236 per ton at 14:43 GMT on Tuesday on the US ICE Futures exchange. Cocoa prices are up nearly 11% over the last week. They have risen 25% year-to-date and have rocketed 103% over the last 12 months.
The Ivory Coast and Ghana have endured significant issues with their production, including hot and dry weather and crop disease. This has resulted in regulators intervening and restricting shipments.
Recent forecasts suggest that output in the Ivory Coast will be 1.8 million tons this marketing season, down from 2.18 million in the previous year. Ghana’s crop is projected to be 620,000 tons, down from 680,000 tons.
Overall, industry groups say the global supply deficit will be approximately 375,000 tons in the 2023-2024 season, which runs from October to September. This was worse than the previous projected shortfall of 173,000 tons this past summer.
That said, a Reuters poll of economists and traders shows that prices will ease from the recent highs by the end of the year.
“This season has been a real wake-up call for industry. We have all known that the concentration of cocoa production in a narrow geographical area posed a serious risk especially as cocoa is a fragile plant, prone to disease and pests,” one participant said.
But while many are concentrating on what the two West African nations will do, others argue that demand from candy makers will be the real story. Global organizations are warning that industry demand has slowed, while consumer purchases have eased in response to rising prices.
Early estimates suggest a single-digit drop in sales in the coming year.
In other agricultural commodities, March corn futures shed $0.045, or 1.02%, to $4.3825 per bushel. March wheat futures added $0.0475, or 0.8%, to $5.95 a bushel. March soybean futures picked up $0.035, or 0.29%, to $11.9975 per bushel. Orange juice futures were flat below $3.81 per pound.