Cocoa gains over 6%. Ghana signals spot purchases for 2024/2025, as production drops 📉

Cocoa futures are gaining more than 6% today. Ghana's cocoa regulator said it will borrow up to $1.5 billion by September to finance spot purchases of the commodity, for the 2024/25 season. The purchases are intended to compensate for still-low production. The information was provided to Reuters by two COCOBOD sources with knowledge of the matter.

• The world's second-largest producer, after Côte d'Ivoire, uses a loan to finance grain purchases from farmers. This is usually agreed upon at the beginning of the season i.e. in September, but unprecedented conditions are forcing the authority to secure supplies earlier. The $800 million loan has encountered delays due to low raw material production.
• So far, Ghana's production is nearly 40% below already low forecasts, making it possible that COCOBOD may not be able to guarantee the full loan. A request for proposals sent to banks indicates that COCOBOD will borrow up to $1.5 billion next season. It is understood that the banks are evaluating and will jointly (with COCOBOD) decide on the optimal amount. Next season's production is expected to be around 810,000 metric tons.
• The regulator has indicated that it has lost about 150,000 tons of cocoa beans, due to smuggling, and expects even more losses this season, as the global rise in cocoa prices is encouraging more smuggling. The cocoa virus has destroyed about 590,000 hectares of farmland between 2018 and 2024.
• At the same time, companies representing investors expect chocolate companies to pay suppliers more and more, to buy the beans. Letters to this effect have been sent to Ferrero, Hershey's, Mars / Mondelez and Lindt & Sprungli, among others. Bears in the cocoa market are counting on improved weather and the rehabilitation of farms, increasing production. Ghana's cocoa export revenues fell nearly 50% y/y, in the first 4 months of the year.

COCOA (H1 interval)

Source: xStation5