Continued dryness prompts traders to raise the forecast cocoa deficit
This year’s harmattan or dry season across West Africa has been particularly dry in recent months. Poor rains have hurt the tree canopy and raised concerns over pod development for the upcoming midcrop. As soil moisture drops, stress increases on cocoa trees, causing leaves to yellow and flowers/cherrelles to wilt and fall. Dry conditions cause poor pod setting, reduce survival and growth, and typically lead to lower yields in the form of fewer and smaller pods. Smaller beans are less desirable as they have a higher shell-to-nib ratio, are harder to process, and result in lower efficiencies or yield when processing. Dry conditions can also lead to other quality issues (free fatty acid profile, peroxide values). Origin countries typically offer midcrop discounted bean differentials to in-country processors as a home for these less-desirable beans.
A recent Reuters poll of market participants showed a widening of the projected deficit by a further 25,000 MT, bringing the mean shortfall forecast to 150,000 MT. Ghana, in particular, seems to be hard hit by this year’s harmattan, with the mean forecast for that country’s crop output falling to just 750,000 MT, down more than 25 percent from the prior season.
The main crop season officially ends later this month, followed by a pause of about a month before the midcrop harvest begins and shipments from West African ports resume. Another wrinkle this year could be supply chain issues and reported shortages of available containers need for exports from origin countries. As COVID-19 restrictions are gradually lifted, most in the industry expected higher rates of grind and consumption through 2022. However, these hopes may be tempered by the recent invasion of Ukraine by Russia, which could pressure consumption of cocoa/chocolate across Baltic countries and possibly more widely.
30-day percent of normal rainfall (Feb. 2-Mar. 3, 2022)
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