Supply outlook: Will cocoa prices rise above recent lows?

Cocoa prices are currently on the rise after remaining under pressure for the past five weeks, as the supply outlook for the commodity improves. Akin Laoye, CEO of FTN Cocoa, provided insights into the recent developments in the cocoa market during an interview with CNBC Africa. Laoye highlighted that the increase in prices is accompanied by a rise in the supply outlook and demand for chocolate. However, he attributed the global cocoa surplus of 142,000 metric tonnes for the 2024-2025 season to slow demand due to high chocolate prices impacting consumer buying behavior. The surplus is not a result of increased production but rather a consequence of reduced demand in the market. One of the key factors influencing cocoa prices is the production decisions of major cocoa-producing countries like Cote d'Ivoire. Laoye discussed Cote d'Ivoire's plan to reduce the amount of cocoa sold to the international market in the upcoming crop season. The country aims to limit contract sales to 1.3 million metric tonnes from 1.7 million metric tonnes to ensure that it can fulfill its commitments. Cote d'Ivoire's strategy is driven by the need to control prices in the international market and enhance its processing capacity. Laoye noted that for this strategy to be effective, other African cocoa-producing countries like Ghana, Nigeria, and Cameroon need to adopt similar measures to collectively influence global cocoa prices. Nigeria's cocoa exports have seen a 27% increase to over 46,970 metric tonnes in January this year, indicating a potential shift in cocoa movement within West Africa. Laoye suggested that some cocoa from Ghana may be finding its way to Nigeria due to market dynamics, as Nigeria's deregulated cocoa market offers better pricing incentives for farmers. However, Laoye emphasized that significant increases in production require long-term planning and investment in farm acreage expansion. Policy interventions focusing on land access and financial support for farmers are essential to accelerate production growth and support the cocoa industry's development. In conclusion, Laoye underscored the importance of government policies to facilitate the expansion of cocoa production and attract more young people into the sector. He called for initiatives that provide graduates with opportunities to engage in cocoa farming by offering access to resources such as seedlings and capital. By empowering farmers and incentivizing agricultural entrepreneurship, Nigeria can enhance its cocoa production capabilities and maximize the economic potential of the cocoa industry in the country. The cocoa market is experiencing notable shifts in supply dynamics and price movements, driven by global demand trends and production decisions in key cocoa-producing countries. As cocoa prices continue to fluctuate, stakeholders in the industry are closely monitoring developments to navigate the evolving market conditions and capitalize on opportunities for growth and sustainability.