CocoaNetwork (New York) – The International Cocoa Organization has revised down their forecasts for global production for both 2021-2022 and 2022-2023.
Based on the revisions made, the estimate of total global production for the 2021/22 season has been reduced by 5,000 tonnes to 4.818 million tonnes. Crop estimates for the Democratic Republic of Congo have been adjusted upwards, in line with recent trade data, by 5,000 tonnes from 30,000 tonnes to 35,000 tonnes. On the contrary, downward revisions of 5,000 tonnes each have been made for both Uganda and Ecuador from 40,000 tonnes to 35,000 tonnes and from 370,000 tonnes to 365,000 tonnes. Global grindings, currently estimated at 5.057 million tonnes are now approximately 25,000 tonnes lower than the previous estimate of 5.081 million tonnes. Though an upward revision of 35,000 tonnes has been made for Côte d’Ivoire (from 675,000 tonnes to 710,000 tonnes), downward revisions have mainly been made for Ghana (down by 25,000 tonnes from 320,000 tonnes to 295,000 tonnes), Indonesia (down by 20,000 tonnes from 480,000 tonnes to 460,000 tonnes), and China (down by 10,000 tonnes from 20,000 tonnes to 10,000 tonnes). Minor downward revisions for a few countries, amounting to 5,000 tonnes, have also been accounted for. These revisions denote a supply deficit of 287,000 tonnes which is smaller than the earlier estimated supply shortfall of 306,000 tonnes previously forecast.
2022/23 FORECASTS
A growing number of uncertainties including the global macroeconomic outlook, climate change and diseases are prone to have an impact on cocoa supply and demand. As such, the 2022/23 season is anticipated to result in a supply deficit while demand is envisaged to be subdued. The expectation of a supply deficit has also been compounded with weather variations especially in West Africa. Despite the expectation of a supply shortfall, compared to the 2021/22 season, global cocoa supply is anticipated to rise by 4% to 5.017 million tonnes. Global cocoa demand is projected to decrease by less than 1% to 5.027 million tonnes.
If realized, this would decrease the total statistical stocks of cocoa beans from 1.712 million tonnes in the previous season to 1.652 million tonnes at the end of the 2022/23 cocoa season, which is equivalent to 32.9% of projected annual grindings for 2022/23.
PRODUCTION
Production is anticipated to outperform the previous season in most major producing countries. Nevertheless, as the season is ongoing, it is worth noting that the challenges from the current global economy are likely to create headwinds for global production. Inflation has caused an increase in the prices of production inputs especially imported inputs such as fertilizer, pesticides, chemicals and other costs such as transportation. These are envisaged to exert financial pressure on cocoa farmers and reduce farm investment. Furthermore, most governments are saddled with financial crises and also likely to curtail their subsidies. These factors coupled with weather variations are likely to pose challenges to global production.
Additionally, trans-border trading of cocoa beans between West African countries has differed over time in terms of size and direction of the flows. It is reckoned that this phenomenon has been occurring during the season under review. Nevertheless, at this junction, it is not possible to precisely estimate the magnitude of these flows. This will become clearer once the trade statistics for Q4.2022 and Q1.2023 for the sub-region are available.
With a forecast of 3.772 million tonnes, Africa is estimated to account for 75% of global production, followed by the Americas with a share of 19% or 961,000 tonnes, and Asia and Oceania at 6% or 284,000 tonnes.
AFRICA
CÔTE D’IVOIRE
For the 2022/23 season, the production forecast for Côte d’Ivoire is 2.230 million tonnes, which reflects an improvement of 109,000 tonnes above the production of the preceding season. Latest arrivals figures show that production in Côte d’Ivoire is below last season’s level at 1.650 million tonnes as at 19 February 2023, merely down by 0.5% compared with 1.659 million tonnes recorded at the same period of the 2021/22 season. The year-on-year reduction in the arrivals at Ivorian ports coincided with information about unusual trade flows from the country to neighbouring countries. To shed light on these cross-border flows, it is important to have in mind the impact of rising cocoa prices, inflation, and developments on currency markets on the fixed farm gate prices of the major cocoa producing countries, which were set in accordance with the market conditions which prevailed last season. Currently, the fixed farm gate price in Côte d’Ivoire (XOF900,000 per tonne or US$1,486 per tonne) is estimated to be US$247 per tonne lower than the estimated farm gate prices in neighbouring countries. These margins are incentivizing cross-border flows (arbitrage) of Ivorian beans. Moreover as at the time of writing, though the rains have started, the harmattan winds have also raised some concerns and could impact the mid-crop.
GHANA
In Ghana, production looks to recover from the significant decline registered during the past season and is envisaged to expand by almost 9% in 2022/23 to reach 750,000 tonnes. Compared to the same period of the previous season, graded and sealed cocoa beans purchases are reported to be up by 54% from 286,000 to 440,403 tonnes as at 03 February 2023. Though the onset of the rains is expected to be beneficial to the crop, the harmattan winds and an outbreak of diseases such as Cocoa Swollen Shoot Virus or Black Pod could affect the season’s output. Moreover, trans-border trade between Ghana and neighbouring countries is likely as the fixed farm gate price in Ghana of GH₵12,800 per tonne or US$1,147 per tonne is estimated to be US$586 per tonne lower than the estimated farm gate prices in neighbouring countries.
CAMEROON
In Cameroon, production is anticipated to continue to grow. The need for beans due to the installation of processing facilities is encouraging cocoa farming as it ensures a ready market for the beans harvested. An impressive output of 300,000 tonnes is projected for the 2022/23 season.
NIGERIA
Nigeria’s production is projected to remain unchanged at 280,000 tonnes.
AMERICAS
Without any significant news on current growing conditions, production for most of the countries in the region is forecast to remain the same or to improve. Output for the season under review is projected at 370,000 tonnes in Ecuador. Brazil’s production is envisaged to be 220,00 tonnes. In Peru, cocoa is being harvested in more areas and as such production for the 2022/23 season is gauged at 160,000 tonnes. For the season under review, production in Colombia and the Dominican Republic is anticipated at 70,000 tonnes and 80,000 tonnes respectively.
ASIA & OCEANIA
The region is now a magnet for cocoa imports from far and wide. Asia currently occupies the second position in terms of global cocoa processing. There is therefore a vital need to increase the output at the upstream level of the cocoa value chain in Asia. As such, most governments are engaged in programmes to improve cocoa production. For the 2022/23 season, production is projected to increase to 200,000 tonnes in Indonesia, to reach 500 tonnes in Malaysia and to remain similar to previous levels in Papua New Guinea at 42,000 tonnes.
GRINDINGS
With inflation on the rise and central banks worldwide increasing interest rates to contain price hikes, the grindings forecast for the current season is shrouded in uncertainty. For the 2022/23 season, the effect of higher production costs i.e., energy and logistics, coupled with rising inflation and interest rates is envisaged to have a lower-than-expected impact on global grindings. Compared to the growth observed in the 2021/22 season, cocoa grindings will continue to grow in some countries while the trend remains undecided elsewhere. Though cocoa demand in developed economies remains uncertain, processing at origin is on the rise and will likely be the game changer for global grindings.
Global grindings are forecast at 5.027 million tonnes, 30,000 tonnes less than the preceding season. In the major regions, the growth projected for grindings varies. Decreases are predicted for Europe (down by 2.4% to 1.801 million tonnes) and the Americas (down by 1.2% to 922,000 tonnes). On the contrary, grindings for Africa and Asia & Oceania are anticipated to rise by above 1% each to 1.149 million tonnes and 1.157 million tonnes respectively.
Grindings in cocoa importing countries are projected to register decreases. Statistics published by the European Cocoa Association (ECA) showed that cocoa grindings for the October to December 2022 quarter of the season under review declined by 1.7% from 365,826 tonnes to 359,577 tonnes. Data released by the Association of the German Confectionery Industry (BDSI) for the same quarter revealed that cocoa grindings fell by 0.6% year-on-year to 99,546 tonnes. Compared to the estimates for the preceding season, grindings in the Netherlands and Germany for the 2022/23 season are projected to decline from 630,000 to 620,000 tonnes and from 480,000 tonnes to 470,000 tonnes respectively. For the fourth quarter of 2022, North American cocoa grindings as reported by the National Confectioners’ Association (NCA) were down by 8.13% from the same period a year earlier to 107,130 tonnes. It is worth noting that the NCA informed the general public that there was one less plant reporting data for its quarterly survey compared with a year ago and this could partly explain the smaller processing volume. The Secretariat’s forecast for the United States for the 2022/23 season is 380,000 tonnes, while grindings in Brazil are expected at 225,000 tonnes.
As most exporting countries are providing incentives for value addition, existing facilities are being renovated to improve processing activities and there are new entrants in major cocoa exporting countries. For the current season, origin grindings are forecast to increase to 2.355 million tonnes. This corresponds to 47% of total world grindings.
With a forecast at 715,000 tonnes for the 2022/23 season, it is obvious that Côte d’Ivoire is all out to achieve its objective of increasing the country’s processing capacity and to maintain its position as the world’s number one grinder. To ramp up processing, there are plans for joint ventures with three private investors in the construction of new processing plants as well as cooperation with the United Arab Emirates to boost value addition.
Grindings in Ghana are forecast to increase to 300,000 tonnes for the 2022/23 season. To encourage and promote value addition and local consumption, the Ghana Cocoa Board has called for the removal of a 35% tax borne by small and medium cocoa processing companies in the country (SMEs) when they purchase raw beans. According to the regulator, “local chocolatiers have been instrumental in the country’s per capita consumption of cocoa from 0.5 kilogram in 2017 to nearly 1 kilogram currently”. The National Committee for the Promotion of Cocoa Consumption (NCPCC) and Cocobod Consumption Committee are working together to increase domestic consumption as well as consumption within the African Continental Free Trade Area (AfCFTA).
The Cocoa Association of Asia (CAA) posted data showing that cocoa processing activities in the region fell by a very small margin of 0.2% year-on-year to 230,806 tonnes for the October to December 2022 quarter. According to the Malaysian Cocoa Board, the country’s cocoa grindings dropped by 7.7% year-on-year to 93,763 tonnes. Although Indonesia and Malaysia are currently net importers of cocoa beans, their ICCO membership status comes under the exporting countries category. For the current season, grindings are anticipated at 465,000 tonnes for Indonesia and in Malaysia at 380,000 tonnes.
Alexis Rubinstein
