The International Cocoa Organization (ICCO) has warned that cocoa production for the 2021/22 cocoa season is a heading towards a world deficit of approximately 181,000 tonnes mainly due to a shortfall in the Ghanaian production.
In its Cocoa Market Report for April 2022, the ICCO cited less conducive meteorological conditions and the outbreak of swollen shoot disease as the major contributing factors for the production decline in Ghana.
“It is anticipated that the 2021/22 production will be nearly one-third less than the 2020/21 harvest. In spite of the poor crop in Ghana, the country is expected to grind over 300,000 tonnes during the 2021/22 cocoa year”.ICCO
According to the ICCO, Ghana Cocoa Board (COCOBOD) reported a year-on-year increase in grindings of 5.51% since the start of the season, thus, between Q4, 2021 and Q1,2022. This signals an improvement in Cocoa processing in Ghana so far this crop season.
Short fall in Côte d’Ivoire
Also in Côte d’Ivoire, the 2021/22 cocoa production is expected to be lower than the 2020/21 crop. As at May 1, 2022, cumulative arrivals of cocoa beans in the country were seen at 1.807 million tonnes, down by 3.2% compared to the volumes recorded in the same period of the previous cocoa year, according to the ICCO.
The Organization explained that the less supportive meteorological conditions can be cited as a cause of the expected lower production in Côte d’Ivoire.
“Côte d’Ivoire is expected to keep an upward momentum in its local cocoa processing operations. At the end of March 2022, the Ivorian Cocoa Exporters’ association (GEPEX) published cocoa grindings data mirroring a 4.3% increase year-on-year from 302,000 tonnes to 315,000 tonnes in the country’s cocoa processing activities. The Ivorian government’s lower export tax policy on cocoa products that are further transformed locally, continues to boost local cocoa processing”.ICCO
The Conseil du Café et du Cacao (CCC) also reported a year-on-year increase in grindings of 9.35% since the start of the season, October 2021 to March 2022. At this stage, however, the ICCO warned that these grindings statistics cannot reveal any potentially negative drawbacks of the Russia-Ukraine war. The ICCO noted that Grindings statistics for Q2, 2022 will become available in July 2022.
Rebound in demand
According to the ICCO, the first half of the 2021/22 cocoa season has so far witnessed a rebound in cocoa demand. Although the global economy is facing significant inflationary pressures and chocolate may be termed as a non-essential good as consumers are financially hard-pressed, the ICCO noted that the positive sales of chocolate may be indicating that chocolate is a timeless product and comfort food.
Factors that have contributed to the increase in cocoa demand, according to the ICCO, include the resumption of the air travel sector which is a major gateway for chocolate sales as well as recommencement of seasonal festivities.
Despite the pent-up demand for cocoa, in an increasingly uncertain world, there is the need to look at factors that may derail the positive trend. As much as Europe has maintained its top position for cocoa processing, the continent relies heavily on Russia’s energy – though efforts are being made to wean Europe from this dependency.
Current high energy prices are prone to affect the operational cost of manufacturers, who are likely to turn the cost to customers. Also, as governments revert to increase interest rates as a means to reduce the pace of rising prices, consumers are reining in their spending at the shops as other important expenses such as mortgages will shoot up.
However, should investors optimism wane due to the rising interest rates, the ICCO noted that investments in cocoa processing are likely to be affected.
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