Cocoa Market Update – February 2021

Cocoa Futures prices bounced sideways in January, however an important upward swing triggered by the better-than-expected US grindings Q4 2020, afterwards offset by the lower-than-expected EU grindings and the changing news about the pandemic, which are worsening expectations of a recovery in demand.
Some highlights of the month have been:  

  • Worse than expected start of year 2021 for all economies worldwide.
  • Global Chocolate confectionery sales fell in Q4 2020 and Chocolate demand will continue to suffer as the global pandemic surge forces countries to prolong lockdowns to try to slow the spread of Covid.
  • Significant drop in Ivory Coast Arrivals during last weeks.
  • Overall Q4 grindings including Ivory Coast only -1% YOY with better-than-expected figures in US, Asia and Ivory Coast.

There is an ongoing decrease of Butter ratios due to oversupply situation with stocks pending to be sold and low demand. The inverse Cocoa Futures market with higher nearby prices has strengthened (London March +69 GBP vs May) making it more difficult to sell Butter in the short term and forcing more discounts.

Cocoa Products Overview
The negative tendency is the cocoa butter ratios, which continue to be under pressure caused by lack of demand.
The demand and prices for cocoa powder are increasing, bringing hopes to the combined ratio.

  • Liquor: Cocoa liquor ratios are still firm. Depending on the next market movements (market going down, hence ratios will go up), extend cover in ratios until the end of Q3 2021.
  • Butter: Ratios are under pressure. The demand remains weak.
  • Solids (Natural – Powder / Cake): The solids are the ones driving the market these days. Demand for cocoa powder continues to be strong. As do prices. Recommendation is to extend coverage until the end of Q3 & Q4 2021.