Cocoa markets heat up as West African harvest outlook dims

Cocoa futures hit the highest level in more than seven months as West Africa’s production prospects dim, threatening global supplies at a time of historically low inventories.

The most-active contract rose as much as 6.1% to $10,454 per metric ton, the highest since April 29, before trimming some gains. Futures have rallied back to the highs witnessed earlier this year following harsh weather in top growers Ivory Coast and Ghana.

“The outlook for the mid-crops have deteriorated in the past weeks,” Steve Wateridge, head of research at TRS by Expana. “The weather conditions in next three months will determine whether we see further deterioration.”

The key growing regions in West Africa have entered the seasonal Harmattan period that can dry out the soil and stress crops. Lower soil moisture and minimal rains will not support mid-year crop growth, according to weather forecaster Maxar Technologies Inc.

While bean arrivals to ports in top grower Ivory Coast are ahead of last year’s pace, analysts at ADM Investor Services calculated that the latest data showed arrivals last week hitting below the five-year average for the period.

“This fact that arrivals have fallen below the average may reinforce concerns that the harvest will rapidly slow down,” the analysts said in a Monday report.