Cocoa prices plunge nearly a quarter in February

The cocoa price resumed its decline at the end of January after a pause. In addition to good harvest prospects, a significant local supply is also contributing to this. Due to the rapid decrease in price, Ivory Coast has decided to take a quite radical intervention in the market. The cocoa price has dropped significantly in recent weeks. The price on the ICE in Chicago decreased by 23.4% from February 2 to 18, down to $3,226 per tonne. Meanwhile, the price in London fell by 23.8% to the equivalent of $3,072 per tonne. Despite the market gearing up for Valentine's Day (which particularly has a positive effect on the demand for chocolate in the United States), the cocoa market has been very weak in recent weeks. Due to the significant decline in cocoa prices, traders are buying much less cocoa, and this is noticeable throughout the entire supply chain. As a result, stocks at the ICE have risen very quickly. On January 24, the stock was still at a level of 1.26 million bags. Meanwhile, the stock has risen to its highest point in four months, namely to 1.64 million bags. This has resulted in a very ample local supply in the United States and Europe. No increase in demand So far, the higher supply has not been followed by an increase in demand. Chocolate producers have significantly reduced their cocoa production in recent years. Now that supply is growing, the producers do not seem enthusiastic about increasing the amount of cocoa in their products again. Additionally, the sector has focused on relatively more luxurious products at a higher price to minimize losses. So far, this strategy is not being revised. In addition to the large supply in storage, the strong harvest expectation is putting pressure on cocoa prices. Favorable weather conditions in West Africa continue to put pressure on prices. Producers in Ivory Coast and Ghana report larger and healthier pods. This fosters confidence in the recovery of supply, leading to a slow but certain normalization of prices. Furthermore, supply is growing in the fifth largest market, Nigeria. Compared to a year ago, exports from the country have increased by no less than 27%. Ivory Coast intervenes The lower prices are causing tensions in the producing countries, particularly in the largest producing country, Ivory Coast. The high prices have not benefited cocoa farmers, especially in West Africa. In practice, the payment prices remained relatively low, while the harvests were extremely weak. Last year, this changed, partly due to an intervention by the Ivorian government. This was intended not only to help farmers secure their livelihoods but also to give farmers the confidence to invest in the sector. However, the higher prices came rather late, as a decline was initiated shortly afterwards. Now that recovery is underway, the payment price is at risk of dropping sharply, while many farmers have not yet made up their losses. For this reason, Ivory Coast has decided to take quite a radical action. The country has announced it will purchase the entire cocoa stocks from cooperatives to ensure that producers are paid, as cocoa prices have fallen to the lowest level in two years. The cocoa sector accounts for about 14% of the country's GDP, but due to declining exports, stocks are piling up. According to Ivorian Agriculture Minister Kobenan Kouassi Adjoumani, the government will collaborate with national market players, processors, and international exporters to organize purchasing and distribution. Ivory Coast is the world's largest cocoa producer, and for about one-fifth of the population, the sector represents an important source of income.