Cocoa prices extends rally on lower production

Cocoa prices have soared in recent weeks, with lower production in Cote d'Ivoire driving the market rally. The end of the El Nino weather pattern and the potential shift to a La Nina pattern are set to boost rainfall in West Africa, improving soil moisture levels and cocoa yields. Tedd George, Chief Narrative Officer at Kleos Advisory, discussed the current dynamics in the cocoa market in an interview on CNBC Africa. The outlook for the market remains uncertain, with fluctuating prices and challenges such as pests and diseases affecting cocoa production across the region. The recent rally in cocoa prices has been fueled by lower production in Cote d'Ivoire and Ghana, leading to a sharp increase in prices. Weather conditions, particularly the transition from El Nino to La Nina, play a crucial role in cocoa production. While El Nino brings drier weather that can impact cocoa crops negatively, La Nina is expected to bring much-needed rainfall to West Africa. However, striking the right balance between rain and sun is essential for the cocoa crop's health and yield. One of the challenges facing cocoa farmers is the prevalence of pests and diseases, such as black pod disease. The high cost of chemicals and the lack of resources for proper crop protection measures have led to decreased yields in countries like Ghana. Investment in new varieties of cocoa trees and effective pest control strategies are crucial to improving cocoa production and safeguarding farmer incomes. In Nigeria, cocoa exports have been on the rise, signaling positive growth prospects for the industry. However, concerns have been raised about proposed export regulations that could hinder the sector's development. The Cocoa Processors Association of Nigeria has highlighted the need for infrastructure improvements and a supportive regulatory framework to enable value addition and sustainable growth in the cocoa processing industry. As Ghana looks to increase its cocoa production in the upcoming season, there are challenges to overcome, including outstanding contracts and default issues. Despite the optimism for a rebound in production, uncertainties remain regarding the country's ability to meet the target of 700,000 metric tons. The high prices in the market present both opportunities and challenges for cocoa-producing countries in West Africa, as they navigate weather patterns, production challenges, and market dynamics. In conclusion, the cocoa market in West Africa continues to face a mix of opportunities and challenges, with weather patterns, production issues, and regulatory concerns impacting the industry. Finding the right balance between natural elements, investment in technology and infrastructure, and supportive policies will be crucial for the long-term sustainability and growth of the cocoa sector in the region.