Cocoa

Prepared by Foresight
April 1, 2020
 TABLES
Cocoa Bean Price Forecast...................................................................................... P. 4
World Cocoa Supply/Demand, Crop Year ................................................................ P. 7
World Cocoa Production ........................................................................................... P. 8
Cocoa Crops in Major Producing Countries ............................................................. P. 9
World Grindings of Raw Cocoa ................................................................................ P. 12
Quarterly Cocoa Grind for Major Countries .............................................................. P. 17
Cocoa Bean Prices: Average Daily Nearby Futures Closes ....................................P. 18
10/12 % Natural Cocoa Powder Prices, NYC ..........................................................P. 20
Ratio of 10/12% Natural Cocoa Powder Prices to Cocoa Bean Prices ...................P. 22
Cocoa Butter Prices .................................................................................................. P. 24
Ratio of Cocoa Butter Prices to Cocoa Bean Prices ................................................P. 26

CHARTS

May 2020 Cocoa Futures ......................................................................................... P. 5

July 2020 Cocoa Futures ......................................................................................... P. 6
World Cocoa Production ........................................................................................... P. 10
World Cocoa Production--Four Largest Countries ...................................................P. 11
World Cocoa Grind ................................................................................................... P. 13
World Cocoa Production, Grind, & Stock Changes ..................................................P. 14
World Cocoa Carryover Stocks ................................................................................ P. 15
World Cocoa Stocks-to-Grind Ratio ......................................................................... P. 16
Cocoa Bean Prices (Nearby Futures) ...................................................................... P. 19
10/12 % Natural Cocoa Powder Prices .................................................................... P. 21
Cocoa Powder to Bean Ratio ................................................................................... P. 23
Cocoa Butter Prices .................................................................................................. P. 25
Cocoa Butter to Bean Ratio ...................................................................................... P. 27

PREPARED BY PAUL J. MEYERS WITH

ASSISTANCE FROM RAE GILLETT
 4200 COMMERCE CT • SUITE 300, LISLE, ILLINOIS 60532 U.S.A.
VA: (540) 450-8054 • LISLE, IL: (630) 210-7475

Cocoa Supply – Demand Outlook and Strategy Update

Futures Price Update:

• May futures prices declined to around $2235 a tonne in early April, $425
below a month earlier, and $90 below a year ago.

• May futures prices have ranged from $2183-2690 a tonne in the past month.

Key Supply – Demand Factors:

• Cocoa arrivals at ports in Ivory Coast were seen at around 1,645 thousand tonnes by
March 29, down 1.7 percent from the same period last season, exporters estimated.

• Cocoa prices have fallen in Nigeria in recent weeks due to lower international prices
and the coronavirus crisis, officials and traders said.

• We estimate 2019/20 world cocoa production at a record 4,860 thousand tonnes, 2

percent above a year earlier.

• U.S. customs authorities have asked cocoa traders to report where and when they
encounter child labor in their supply chains in Ivory Coast, industry sources said.

• Cocoa prices fell for the third consecutive week at Cameroon's chief port of Douala,
according to the country's Cocoa Board.

Summary of Key Factors:

• Cocoa arrivals at ports in top grower Ivory Coast were seen at around 1,645 thousand
tonnes between October 1 and March 29, down 1.7 percent from 1,674 thousand in
the same period last season, exporters estimated. In the week ending March 29,
cocoa arrivals of about 22 thousand tonnes were down from 32 thousand during the
same week last season. Abundant rain mixed with sunny spells in most of Ivory
Coast's cocoa regions in the week ending March 29 will boost the mid-crop, farmers
said. Ivory Coast is in the rainy season that runs from mid-March to late October when
downpours are regular. Farmers said that if the rain remained frequent, most of the
mid-crop beans would be big and the harvest would be longer and larger. The mid-
crop season starts on April 1 and runs until the end of September. Farmers indicated
that they would only have small quantities of beans in April, but volumes would rise in
May. We estimate Ivory Coast's 2019/20 cocoa mid-crop at 560 thousand tonnes, 5
thousand below a year earlier.

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• The fall in the price of cocoa in the international market, poor quality beans in the
domestic market, and the worldwide coronavirus crisis have sent the commodity's
price plunging in Nigeria, officials and traders said recently. Graded cocoa is trading in
Edo state, the largest cocoa grower in the country's midwest, at 650 thousand to 700
thousand Nigerian naira a metric tonne compared with 800 thousand a week earlier,
according to an official with the Cocoa Association of Nigeria. The spread of the
coronavirus in southwestern Nigeria compelled the Ondo state government to stop the
movement of vehicles. Markets are also being closed on some days. Ondo state is
Nigeria's largest cocoa producer. Farmers in the state were not buying agrochemicals
to combat insect attacks because they are not selling cocoa and have no money to
purchase chemicals. In Edo state, where a case of the coronavirus has been
confirmed, exporters and traders are not financing the purchases of cocoa, a trader
said. Companies that buy cocoa in Edo state are watching the way the market will go.

• We forecast 2019/20 world cocoa production at a record 4,860 thousand tonnes, 2

percent above a year earlier, and 4 percent above the 2017/18 crop. Larger crops are
likely this year in Ivory Coast, Ghana, Brazil, Nigeria, Cameroon, and Ecuador. Ivory
Coast's 2019/20 cocoa production is forecast at an all-time high 2,200 thousand
tonnes, up 2 percent from the previous year, and 12 percent above the 2017/18
production. We estimate Ghana's cocoa production in 2019/20 at 855 thousand
tonnes, 5 percent above a year earlier, but 6 percent below two years ago.
Cameroon's 2019/20 cocoa crop is projected at 290 thousand tonnes, up 4 percent
from the previous year. World cocoa grindings in 2019/20 are forecast at 4,816
thousand tonnes, marginally above a year earlier, but 5 percent above 2017/18
grindings. The coronavirus pandemic will reduce economic growth in most countries,
with a number of countries falling into recession. The weaker economies will result in
less demand for chocolate and cocoa and a cutback in grindings. World cocoa
production in 2019/20 will about match world grindings, with world carryover stocks
declining 4 thousand tonnes.

• U.S. customs authorities have asked cocoa traders to report where and when they
encounter child labor in their supply chains in Ivory Coast, industry sources said,
following calls from American lawmakers to ban some imports. Cocoa traders and
chocolate companies have repeatedly missed internationally agreed targets for
reducing the worst forms of child labor from supply lines in West Africa, all sides have
acknowledged. Pressure in the U.S. is now increasing after two senators asked the
U.S. Customs and Border Patrol (CBP) last July to use its authority to block the import
of Ivorian cocoa produced with forced labor. CBP has "engaged with the cocoa
industry to trace cocoa supply chains and understand industry internal controls and
compliance regimes", a CBP spokesperson told Reuters. Even a partial blockage of
cocoa imports could inflict steep costs on suppliers, increase the price of chocolate,
and have a crippling effect on Ivory Coast exports which rely heavily on U.S. buyers.
About 2.1 million children work in cocoa in Ivory Coast and Ghana.

• Cocoa prices fell for the third consecutive week on an abundant supply of the crop at
the country's chief port of Douala, according to data released on March 31 from
Cameroon's National Cocoa and Coffee Board. Buyers offered 1,215 CFA francs per
kilogram of cocoa beans sold at the port, down 10 percent from 1,350 francs a week
earlier. Cocoa prices at the port have now fallen more than 18 percent in the past
three weeks. However, cocoa bean prices remain above the 1,000 CFA francs paid a
year ago. In Cameroon's major crop-growing South-West region, cocoa bean prices
rose for the second straight week due to stronger demand for the crop, farmers and
buyers told Dow Jones Newswires. A kilogram of cocoa beans sold for 1,300 CFA
francs, up 4 percent from a week earlier. The price has risen more than 8 percent in
the past two weeks due to an influx of middlemen buyers at the farmgates and a pick-
up in supplies. The increase in supplies has also been helped by farmers ignoring a
lockdown imposed by separatist forces fighting against government troops.

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Price Risk:

• The coronavirus pandemic has weakened global economic growth, with a recovery not
expected before the fourth quarter. The pandemic will pressure cocoa futures prices in
upcoming months.

• Global cocoa carryover stocks in 2019/20 will likely remain tight even with lower-than-
expected cocoa grindings. The tight global carryover stocks will underpin futures
prices in the months ahead.

Historical Price Action:

• Nearby cocoa futures prices in March averaged $2407 a tonne, down $465 from a
month earlier, but $204 above the March, 2019 average.

• In 5 of the past 10 years, nearby cocoa futures have increased from April through
August.

Price Outlook:

• Nearby cocoa futures prices in April-June are forecast to average $2250-2325 a tonne
compared with $2410 a year earlier.

• For July-September, nearby futures prices are forecast to average $2275-2350 a

tonne compared with $2343 a year earlier.

Coverage Recommendations: Cocoa, Cocoa Powder, and Cocoa Butter

Cocoa Futures:

Upper Tier: > $2350 a tonne -- add coverage two weeks at a time to keep 4 weeks out

Middle Tier: $2250-2350 a tonne -- add coverage to keep 8-12 weeks out

Lower Tier: $2150-2250 a tonne -- add coverage for an additional 4-6 weeks

Cocoa Products Price Outlook:

• 10/12 natural powder prices averaged 96 cents a pound in March, down 2 cents from
a month earlier, but 6 cents above a year ago. Prices in early April were about 95
cents a pound. Powder prices are forecast to average 92-99 cents a pound in April-
June compared with 90 cents a year earlier. Powder ratios in April-June may average
0.90-0.95 times nearby futures.

• Cocoa butter prices averaged 259 cents a pound in March, down 67 cents from the
February average, but 5 cents above the March, 2019 average. Prices in early April
were around 248 cents a pound. Cocoa butter prices are likely to average 245-255
cents a pound in April-June compared with 276 cents a year earlier. Butter/bean ratios
may average 2.40-2.45 times nearby futures in April-June.

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