Fresh highs for cocoa, ignoring bearish grind numbers
Cocoa futures surged nearby or above $2,800 MT to multiyear high after this week’s release of somewhat anemic Q4 grind numbers. Trade was waiting to see whether Q3’s grind numbers were a one-off or whether softness is continuing to creep into the cocoa demand.
North American cocoa beans grind in Q4 was reported at 110,321 MT, down nearly 6 percent YOY and marking the second consecutive down quarter. This is the smallest Q4 grind in 12 years. Western Europe, meanwhile, reported 355,201 MT of grind, down over 1 percent YOY, which followed disappointingly flat results in Q3 2019. Driven largely by 23 percent growth in Malaysian grind, Asian Q4 grind was up nearly 9 percent YOY, setting yet another new record. That growth below 9 percent, however, is a marked slowdown from the double-digit growth witnessed in the previous two quarters. This could hint at slower global grind and cocoa consumption in 2020.
Although Q4 grind results were mixed with contraction in the more developed North American and European market and growth stemming from developing market in Asia and West Africa, perhaps a more interesting way to look at global demand is on a weighted-average basis.
Combining all reporting regions yielded a global decline of 1.0 percent compared to Q3-2019 and only a modest rise of 1.6 percent from Q4 2018. This is significant slowdown from the growth of 4 to 5 percent seen through most of the past 18 months. A second consecutive negative result for both EU and the Americas is clearly bearish for demand and price direction. Despite the lackluster results, cocoa prices surged to new highs on renewed speculative buying interest.
North America quarterly cocoa grind history
Source: NCA, McKeany-Flavell
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