Cocoa Market Report – December 2020

Cocoa Market Report Summary

December 2020

After the bullish storm triggered by the large contract holder who requested the physical delivery of big Cocoa volumes against New York exchange, the Cocoa Futures prices decreased in December towards the previous low levels lead by origin selling and funds liquidations.

Concerns about supply and demand remain in an environment full of uncertainties.

Some key developments to follow up may be:

  • Short-term demand impacted by the more restrictive movement measures and lockdowns in Europe (e.g. Germany) and by the new and more contagious strain of Covid in the UK.
  • However, the approval and implementation of vaccines in the USA, UK and Europe improve expectations for a mid-term demand recovery.
  • Decrease of Ivory Coast Arrivals and Ghana purchases below last year.
  • Rainfall and weather conditions are improving over West Africa.
  • Funds movements, origin selling and industry cover position.
  • GBP getting weaker due to Brexit deadlock and new Covid strain.
  • Regarding Cocoa Products, there is an ongoing decrease of Butter ratios due to oversupply situation with stocks pending to be sold and low demand. The inverse structure of the Cocoa Futures market with higher nearby prices is encouraging aggressive short-term Butter discounts and sales to avoid carrying costs. 

Cocoa Powder prices are still under upward pressure due to strong demand and Supply tightness for Powder due to low Butter ratios and high Butter stocks that discourage origin pressing.

Combined Ratios (Butter + Powder) have decreased because current higher Powder ratios do not offset lower Butter ratios impact.