Cocoa futures settled higher for a sixth straight session on Friday, with prices marking another settlement at their highest in more than 46 years.
“The availability of cocoa from West Africa remains restricted and projections for another production deficit against demand for the coming year are increasing,” Jack Scoville, vice president of the Price Futures Group, wrote in Friday report.
“Traders are worried about another short production year and these feelings have been enhanced by El Niño that is threatening West Africa crops with hot and dry weather,” he said.
Cocoa futures saw their most-active March contract
CCH24,
+1.02%
CC00,
+1.02%
climb by $53, or 1.1%, to settle at $5,009 per metric ton on the ICE Futures U.S. exchange on Friday. That was the highest finish for a most-active contract since July 20, 1977, according to Dow Jones Market Data.
Cocoa prices have been rallying since the spot month contract posted a new four-month high in November 2022, said Darin Newsom, senior market analyst at Barchart. From that point on, they “gained momentum that has continued through today.”
Prices also marked a more than 46-year high when they settled at $4,956 on Thursday. They climbed 15% in January, marking the best monthly gain since November 2020.
There are concerns that “dry weather fanned by Harmattan winds could affect the mid-crop harvest in West Africa, which begins in April,” analysts at Commerzbank wrote in a note dated Friday. Harmattan is defined as a cool, dry wind blowing from the northeast or east in the Western Sahara.
“The cocoa harvest is already lagging well behind the previous year’s level,” the analysts at Commerzbank said. Estimates by exporters show that arrivals in the ports of the Ivory Coast, by far the largest cocoa-producing country, were 35% lower from the start of the harvest year in October to the end of January as compared with the same period last year, they said.
That means the cocoa market is likely to face a supply deficit for the 2023-24 crop year for a third year in a row, the analysts said.
The market may have already seen the effects on prices of chocolate at the retail level, Newsom said.
That was apparent during the holiday baking season, and now “here we are at the Hallmark greeting-card holiday of Valentine’s Day,” he said. “This has likely kept demand strong, regardless of price.” Valentine’s Day is Feb. 14.
That sends a message about the U.S. and global economy — that “consumers aren’t afraid of higher prices for luxuries,” Newsom said.
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