FILE PHOTO: Farmers work at a cocoa farm in Daloa, Ivory Coast Oct. 3, 2023. REUTERS/Ange Aboa/File Photo
NEW YORK: Cocoa futures soared as much as 12% in New York, the biggest intraday jump in three months, as dry weather in the world’s top producers fuels concerns about output in the upcoming season.
The most-active contract reached US$7,525 a tonne last Friday, on course for a weekly gain of more than 10%.
Top growers Ivory Coast and Ghana have seen a “significant decrease in shower activity” over the past month, leading to below-normal soil moisture and limited crop growth, said Brandon Fox, an operational meteorologist at Maxar Technologies Inc.
“If more rain doesn’t fall during the last week of August, then it would not be a great end to this growing season,” Fox said, noting that models continue to indicate below-normal rain for the next two weeks.
Still, analysts expect a recovery in West Africa’s cocoa production in the season starting in October, helping to flip the market into a surplus.
Wetter conditions if a neutral La Nina pattern takes hold later this month could allay weather concerns, said Cade Groman, a forecaster at Commodity Weather Group. Showers are expected to be closer to normal next month, but October is “currently leaning drier,” Groman added.
Interpretations of the weather’s impact have also been mixed. Some have seen “above-average rainfall raising the risk of disease”, so weather’s effect is difficult to gauge, said John Goodwin, a senior commodity analyst at ArrowStream Inc.
Markets could be overreacting to the weather forecast, said Michael McDougall, managing director at Paragon Global Markets. “A problem could be building,” but the price move could also “show how sensitive the market is to any supply issue now”, he said. — Bloomberg
