By: Alexis Rubinstein, Managing Editor - Coffee Network
CocoaNetwork (New York) – In their latest bulletin, the International Cocoa Organization (ICCO) has upwardly revised their forecast for global cocoa production in 2021/2022 by 500 tonnes to 4.818 million tonnes, and global grindings have been revised downwards by almost 62,000 tonnes from 5.057 million tonnes to 4.995 million tonnes. At the regional level, production for Africa has been revised down by 5,000 tonnes from 3.594 million tonnes to 3.589 million tonnes while the Americas have witnessed an upward revision of 6,000 tonnes from 957,000 tonnes to 963,000 tonnes, and Asia and Oceania remain virtually flat at 266,000 tonnes with an increase of 200 tonnes. In terms of global grindings, there was a downward revision of almost 62,000 tonnes. Grindings for Europe have been reduced by almost 75,000 tonnes to 1.771 million tonnes, while they have gone up by 9,000 tonnes in Asia and Oceania to 1.154 million tonnes. An additional 3,000 tonnes in grindings have been recorded for the Americas at 935,000 tonnes and Africa remains virtually flat with a 1,000-tonne increase to 1.135 million tonnes.
For 2022/2023, with about five months to the end of the season, one certainty about the ongoing season is the occurrence of a supply deficit, although increases are envisaged for global production by 3.4% from 4.818 million tonnes to 4.980 million tonnes and grindings by 1.5% from 4.995 million tonnes to 5.072 million tonnes. Despite the expected rise in global production and grindings, on the one hand it seems the lower exports of beans from major exporting countries especially from the top producer, Côte d’Ivoire, which are making the headlines are contributing to heightened concerns regarding the projected supply deficit for the season under review. On the other hand, it is worth mentioning that since the start of the season, inventories at the exchange are relatively high.
Is the build-up in stocks at the exchange a response to supply chain challenges and are traders tweaking their supply chain strategies in anticipation of a continuous increase in origin grindings, which consequently can result in a decline in exports of beans but an increase in semi-finished products? For 2010/11 and 2021/22, the compound annual growth rate (CAGR) for exports of beans and exports of semi-finished products in Côte d’Ivoire was 3% and 7% and in Ghana -4% and 4%, respectively. This is evidence that origin grindings can be viewed as supporting the upward trend in exports of semi-finished products, consequently resulting in the low bean export rate. Or since cocoa is a cash crop, is the build-up in cocoa inventory a means of collateral for finance purposes? Whatever the case may be, cocoa supply may be said not to have reached a pinch-point2 as the current volume of cocoa production is still at a level that poses some concerns for the security of supply. The Secretariat will continue to monitor these scenarios and report in subsequent Bulletins.
Compared to the previous Bulletin, global production for the 2022/23 season has been revised down by almost 37,000 tonnes and is projected at 4.980 million tonnes. The countries that led to the revisions include Côte d’Ivoire (-30,000 tonnes to 2.200 million tonnes), Indonesia (-20,000 tonnes to 180,000 tonnes), Cameroon and Brazil (-10,000 tonnes each to 290,000 tonnes and 210,000 tonnes respectively) and Congo (-5,000 tonnes to 15,000 tonnes). On the contrary, upward revisions have been made to the production for Ecuador (+30,000 tonnes to 400,000 tonnes), Venezuela (+5,000 tonnes to 20,000 tonnes). Fractional changes for other countries amounting to almost 3,000 tonnes have also been added.
Global grindings are envisaged at 5.072 million tonnes, up by 45,000 tonnes as compared to the data published in the last Bulletin. Higher grindings are envisaged for Côte d’Ivoire (+35,000 tonnes to 750,000 tonnes), Brazil (+15,000 tonnes to 240,000 tonnes), China and Switzerland (+10,000 tonnes each to 22,000 tonnes and 60,000 tonnes respectively), including an aggregate of +22,000 tonnes for minor upward revisions for some countries. Downward adjustments have been done for the United States (-20,000 tonnes to 360,000 tonnes), Germany and the United Kingdom (-10,000 tonnes each to 460,000 tonnes and 85,000 tonnes respectively), as well as small reductions amounting to 8,000 tonnes for some countries.
With global production anticipated to fall short of global grindings for the ongoing season, the revised global production deficit is now projected at 142,000 tonnes, compared to the Secretariat’s earlier deficit of 60,000 tonnes. Total statistical stocks are therefore anticipated to reach 1.632 million tonnes, which is equivalent to 32.2% of projected annual grindings in 2022/23.
PRODUCTION
Overall, a positive growth in global production is underway for the season under review. However, as much as producing countries are researching and adopting new cocoa varieties that are aimed to adapt to the vagaries of weather patterns, climatic factors continue to play a major role in cocoa production. According to the World Meteorological Organization (WMO), “the likelihood of El Niño developing later this year is increasing. There is a 60% chance for a transition from ENSO-neutral to El Niño during May-July 2023, and this will increase to about 70% in June-August and 80% between July and September”3. A study by the ICCO in 2018, pointed out that “cocoa yields are expected to decline dramatically during El Niño events of an exceptional strength; and this, in turn, could fuel a procurement risk for cocoa exporters”4. Thus, yields for the ongoing 2022/23 mid-crop season and the 2023/24 season may depend on the intensity of the predicted El Niño, as well as other factors such as fertilizer inputs and husbandry practices, among others.
At the regional level, production is expected to increase by almost 4% in Africa (+138,000 tonnes to 3.727 million tonnes) and to increase by over 2% in the Americas (+25,000 tonnes to 988,000 tonnes). A small variation of 0.4% is envisaged for the Asia and Oceania region (-1,000 tonnes to 265,000 tonnes). In terms of shares of total world production, Africa is expected to remain by far the largest cocoa producing region, accounting for 75% of world cocoa output. The shares of the Americas and Asia and Oceania are likely to be 20% and 5%, respectively.
AFRICA
CÔTE D’IVOIRE
Arrivals at the ports in Côte d’Ivoire continue to be lower, trailing behind last season’s pace. Port arrivals data as published by Reuters as at 7 May 2023 were recorded at 1.945 million tonnes, down by 6.6% compared to the values recorded for the same period of the previous season. The mid-crop is underway, and the onset of heavy rains has heightened fears of a Cocoa Swollen Shoot Virus outbreak. Cocoa production forecast for Côte d’Ivoire is however envisaged to be up by almost 4% to 2.200 million tonnes.
GHANA
Production in Ghana is anticipated to recover from the previous season’s significant drop. An improved main crop, with support from the production enhancement programmes (PEP), supported yields. Compared to the 2021/22 season, production for the 2022/23 season is expected to increase by almost 10% from 683,300 tonnes to 750,000 tonnes.
Production in Cameroon and Nigeria is gauged at 290,000 tonnes and 280,000 tonnes, respectively.
AMERICAS
In recent years, Ecuador has witnessed an upward trend in cocoa production. Promoting the cultivation of both the fine flavour variety, Cacao Nacional (CN), and the hybrid variety (CCN-51) contributed to the upward trend in yields. While a premium is paid for the CN variety beans which may incentivize farmers to increase production, the CCN-51 variety produces large quantities of beans. For the 2022/23 season, production is expected to be 400,000 tonnes, up by 10% from the 2021/22 season.
Considering the dynamism of the cocoa sector in Peru and as larger areas are coming into production, an output of 160,000 tonnes is envisaged for the 2022/23 season.
With heavy rains reported in Brazil, production is now envisaged at 210,000 tonnes. Production in Colombia and the
Dominican Republic remains unchanged to 70,000 tonnes and 80,000 tonnes, respectively.
ASIA & OCEANIA
Although the region is known as a major net importer of cocoa beans, several development schemes to enhance cocoa production are being pursued by the main producers in Asia and Oceania. As such, cocoa production for the year under review is expected at 180,000 tonnes in Indonesia, at 500 tonnes in Malaysia, and at 42,000 tonnes in Papua New Guinea.
GRINDINGS
Cocoa grindings are envisaged to be positive despite the uncertainty about the global macroeconomy. For the period under review, cocoa processing held up well at origin and may have caused unintended adverse consequences such as low exports of cocoa beans from top producing countries to importing countries. Global grindings of cocoa beans for the 2022/23 season are envisaged to increase by 1.5% to 5.072 million tonnes.
At the regional level, compared to the past season, Europe is predicted at 1.795 million tonnes (+24,000 tonnes), Africa at 1.185 million tonnes (+50,000 tonnes), Asia and Oceania at 1.160 million tonnes (+6,000 tonnes). Grindings are expected to decrease to 932,000 tonnes (-3,000 tonnes) in the Americas. The global shares per region are 35% for Europe, 23% each for both Africa and Asia and Oceania, and 19% for the Americas.
Accounting for 52% of projected global grindings, grindings for importing countries are forecast to rise slightly by 0.1% from 2.658 million tonnes in 2021/22 to 2.662 million tonnes in 2022/23. Long term headwinds for grindings in importing countries may be related to the increasing processing activities and decrease in exports of beans at origin.
Data published by the European Cocoa Association (ECA) for the Q1.2023 period, showed a 0.5% increase from a year earlier to 375,375 tonnes. The German Confectionery Industry Association (BDSI) Q1.2023 data portrayed a 4% rise year-on-year to 101,923 tonnes. Taking into account the available information, data for the Netherlands, Germany and France target 620,000 tonnes, 460,000 tonnes and 135,000 tonnes, respectively.
The National Confectioners Association (NCA) reported that grindings for the Q1.2023 period showed a 4.38% decrease from a year earlier to 109,666 tonnes. Grindings in North America could continue to weaken more than expected if imports of cocoa products and chocolate confectionery are prioritized over imports of raw beans. Forecasts for the United States, Canada and Mexico are 360,000 tonnes, 100,000 tonnes and 60,000 tonnes, respectively.
Representing 48% of global grindings, origin grindings are forecast at 2.410 million tonnes as a majority of cocoa producing countries are making great efforts to move towards the downstream products instead of just exporting raw cocoa beans. A key development in Côte d’Ivoire’s cocoa grindings has been the expansion of existing facilities and the commencement of operations of newly established factories, such as Guan Chong’s factory which has a 60,000-tonne capacity5. For the 2022/23 season, grindings in Côte d’Ivoire are expected to increase to 750,000 tonnes. In Ghana, grindings for the season are expected to rise to 300,000 tonnes. The Cocoa Association of Asia (CAA) reports compiled data for Indonesia, Malaysia and Singapore. For the Q1.2023 period, data published by the CAA was up year-on-year by 4% to 222,028 tonnes. Although Indonesia and Malaysia are currently net importers of cocoa beans, their ICCO membership status comes under the exporting countries category. As such, these two countries are currently within the scope of origin grindings. For the 2022/23 season, grindings for Indonesia and Malaysia are estimated at 465,000 tonnes and 375,000 tonnes, respectively.
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