Cacao price starts to decline slowly

The cocoa price has declined again in recent weeks, although the drop has become less drastic. Ivory Coast is beginning to experience the consequences of minimum payout prices, while its main competitor Ghana has sharply reduced its prices.Over a longer period, cocoa prices appear stable over the past two weeks, but a closer look shows there has still been a small yet significant decline. On the ICE exchange in London, prices fell by 2.8% during this period to the equivalent of $2,814.63. On the other side of the Atlantic, prices declined by 2.4% to $2,925.The general situation on the international cocoa market has remained largely unchanged in recent weeks. On the demand side of the market there is still no sign of improvement. Chocolate sales remain weak in virtually all markets, according to major international trade media. For now, the upcoming holidays are hardly generating additional demand. Although that could still change with Easter roughly a month away, consumption has not yet been noticeably stimulated. Stock levels are at their highest point in six months, reaching 2.15 million bags.In the background, abundant rainfall in West Africa, where more than half of global production takes place, remains an important factor. Because drought has not materialized this year, analysts expect production to exceed the five-year average. Add to this that companies in the sector are increasingly using less cocoa in their chocolate, and significantly lower prices seem inevitable.Ivory Coast and GhanaThe effects are also becoming visible in the producing countries. Despite weak harvests in Ivory Coast, the world’s leading producer, around 200,000 tonnes of cocoa appear likely to remain unsold. This is the result of recent government intervention. The Ivorian government has introduced a minimum guaranteed price that is significantly higher than the current market price. As a result, importers are avoiding cocoa from the country. Moreover, the rapid decline of recent weeks has created additional price pressure. Buyers are taking a wait-and-see approach because they expect to obtain even better prices in the very short term. However, this effect now seems to be slowing somewhat, meaning the price decline is no longer continuing at the pace seen in previous weeks. In the second-largest producing country, Ghana, similar problems are occurring, although the exact scale is unclear. What is clear, however, is that the payout prices to farmers have dropped sharply. Ghana’s cocoa regulator, COCOBOD, has reduced prices by as much as 29.6%. With this move, the sector in the country is pursuing the opposite strategy to Ivory Coast. By lowering prices, the regulator aims to keep Ghana competitive and hopes in this way to win the competition with the world’s largest cocoa market.