Cocoa Market Report – July 2020

COVID-19, as with many commodities, has had a large impact on the cocoa market, which has driven an increase in demand of powder, but a decrease in butter, to the extent that some European grinders have even temporarily stopped activity. This switch in demand forms the main focus of analysing the cocoa market at present.

As a result of butter demand decreasing, butter ratios are weakening and consequently the ratio for powder is increasing. Not only do the ratios cause powder prices to firm, but the increase in demand further supports this, along with the strengthening of the euro against the pound and general market uncertainty due to COVID-19.

The market currently sits in dangerous territory; general predictions/opinions on when to buy commodities is slightly distorted, as a looming recession would make one assume that prices will fall and therefore place buyers in a good position. However, although this is true, one must remember how the combined ratio of butter and powder is split. Currently, with every decrease in bean price a subsequent increase of powder ratio can occur, meaning the price would remain stable or firm. As a result, butter prices are currently attractive, but powder is somewhat of a challenge. With consumer demand being difficult to follow in the current climate, the issue moving forward is, will this continue?

We are recommending to all customers to consider, if they have not already done so, Q1 and Q2 of next year, as we believe this trend will continue and October sees the implementation of the LID (Living Income Differential).

Some other key highlights of the cocoa market this month include:

  • Economic slowdown due to COVID-19 weakening consumer confidence – negative affect on cocoa consumption. Although, if the outbreak is controlled over the next few months consumption may recover
  • ICCO reduced its current deficit by 5,000 MT to 80,000 MT and estimates that overall grindings are down by 1.6%
  • Market remains unstable – any further decrease in futures may trigger purchasing interest by funds and industry
  • Combined ratio of 3.51 – 2.5 for butter

If you have any questions regarding the cocoa market or would like to discuss our product portfolio, please do not hesitate in contacting