Cocoa Market Update – March 2021

Despite significant improvement in Ivory Coast arrivals and overall good supply fundamentals, Cocoa Futures prices ended February at the highest prices since the start of this year.

This sudden and strong rise in Cocoa Futures could have been influenced by: 

  • Rising Covid vaccination rates in the US and the UK can speed up the deadlines to finish lockdowns boosting Chocolate demand expectations.
  • The Cocoa Futures inverse structure in combination with Funds positions and historically low certified valid stocks in London and New York maintain the risks of short covering rallies.
  • Rebound of most Commodities (e.g. Crude Oil) with news about a new upward Commodities Super Cycle, to which Cocoa could be joining.

Regarding Cocoa Products, there is an ongoing decrease of Butter ratios due to oversupply situation with stocks pending to be sold and low demand. Cocoa Powder prices have increased significantly since the beginning of the year and are still under upward pressure due to strong demand and supply tightness for Powder driven by low Butter ratios and high Butter stocks that discourage origin pressing.

The inverse Cocoa Futures market with higher nearby prices has strengthened making it more difficult to sell Butter in the short term and forcing more discounts. Butter Ratios have decreased further for both spot and forward positions. 

Cocoa Powder prices have increased significantly since the beginning of the year and are still under upward pressure due to strong demand and Supply tightness for Powder driven by low Butter ratios and high Butter stocks that discourage origin pressing. 

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

Short term Powder demand is strong, and some suppliers are having difficulties to deliver.

Cocoa Products Overview

  • Liquor: Cocoa liquor ratios had recently declined. If market continues to move up, ratios will continue to move down. Nevertheless, we do not expect a collapse.
  • Butter: Ratios are still under pressure, yet not as dramatic as it was during last month. The demand remains weak, although we may see a slight recovery.
  • Solids (Powder): Demand for cocoa powder (natural and alkalized) continues to be strong.