Cocoa grinds slow in Q3, closing crop year on a soft note

Although some regions of the world continued to experience solid growth in grind numbers throughout the 2021/22 season, chinks in the armor were seen, with at least two main regions starting to show weakness.

Calendar-year Q3 (July to September) marks the end of the crop year, so it can be useful to report grind numbers on an October-September basis rather than a calendar year. In this way, demand or grind is more synchronized with the crop cycle.

Western Europe was the first region to report, showing a drop of 1.6 percent in beans crushed in the last quarter vs. Q3 2021. This is the first negative result in nearly a year and a half for the region and may be foreshadowing a marked slowdown in consumption ahead. After growing by 3.7 percent in 2020/21, European grind slowed to growth of 2.7 percent in 2021/22. Looking into next year, European grind could underperform with flat to negative results in 2022/23. Grind growth will certainly be substantially below that seen in the past two crop cycles. Many analysts may be mistakenly still basing their surplus/deficit forecasts on continued robust grind in 2022/23.

Meanwhile, Malaysia and Asia grind results continued to impress, up 15 percent and 9.5 percent, respectively. Asia ended the crop year with robust grind growth of 5 percent. However, another way to see this is that the bar to beat next year is very high and that grind could call somewhat short of expectations.

West African grind, known as GEPEX, is also showing above-trend growth, particularly in the conversion of raw beans into semi-finished cocoa products (liquor, butter, and cake). This trend will likely continue well into the future.

The problem child, as far as global cocoa grind numbers are concerned, has been the North American market. In Q3, bean grind fell by 3.4 percent across the U.S., Mexico, and Canada. For all of 2021/22, North American grind fell 3.4 percent. It is always important to step away from the individual trees to see the entire forecast: With all major regions reporting, that leaves the world with a grind growth of 1.6 percent in 2021/22.