The International Cocoa Organization (ICCO) has announced a significant upward revision to its forecast for the global cocoa shortage, highlighting a critical supply-demand imbalance. This adjustment has propelled cocoa prices in New York to rebound above the $9,330 per ton mark, reflecting heightened market volatility and uncertainty.
ICCO has revised the global cocoa shortage forecast to 439,000 tons, up from 374,000 tons.
Cocoa prices have surged to $9,330 per ton, reflecting a 39% increase in recent weeks.
The inventory-to-grindings ratio is projected to fall to 21% this year, with potential for further decline next year.
Recent data from ICCO indicates that global cocoa demand will outstrip production by 439,000 tons this year, significantly surpassing the February estimate of a 374,000-ton deficit. This surge in demand is primarily attributed to increased cocoa grinding activities in consuming countries. Despite record high cocoa prices earlier this year, grinding activities have remained robust, emphasizing the unrelenting demand for cocoa products.
In response to these dynamics, cocoa prices experienced a dramatic fluctuation: initially soaring from $4,000 per ton to over $12,000 in early 2023, followed by a sharp decline of 44% into May. However, a recent surge has seen prices climb by approximately 39%, stabilizing at $9,330 per ton. ICCO has adjusted its global cocoa grindings forecast to 4.86 million tons, up from the initial 4.78 million tons, and increased its production estimate by 12,000 tons to 4.46 million tons.
Market analysts, including Pierre Andurand of Andurand Capital Management, have emphasized the critical nature of the current shortage. Historical comparisons reveal that while current cocoa prices may seem high, they are significantly lower when adjusted for inflation compared to past peaks. The inventory-to-grindings ratio, a key measure of supply relative to demand, is projected to drop to 21% this year, far below the typical 35-40% range, and could plummet to 13% next year, potentially leading to severe shortages and further price spikes.
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The information provided in this market insight is for general informational purposes and should not be considered financial advice. It is not intended to offer any financial recommendations or endorsements. Any decisions made based on the content are the sole responsibility of the reader.
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