Bi-weekly Commodity Insight
Optimism is dawning on West African cocoa farms. Hopes of better weather conditions and protection from plant diseases have put growers in a better mood. Vietnamese coffee farmers are in a much gloomier mood. Join us as we take a closer look at the commodity market this week.
Recovery from extreme levels
Cocoa prices have soared amid concerns about poor harvests from top producers Ghana and Ivory Coast, which we have covered in previous articles. Extreme weather conditions and the plant diseases black pod disease and swollen shoot virus have characterised West African crops, resulting in the worst harvests in over 22 years in Ghana.
Growers now see brighter times on the horizon. Plantations are expected to benefit from better weather conditions, as well as adequate access to fertilisers and pesticides provided by the Ghanaian regulatory body, the Ghana Cocoa Board. According to an article from Bloomberg, the improvements are expected to boost cocoa production in the 2024/2025 season to 700,000 tonnes.
Cocoa prices have had volatile weeks. It peaked at USD 11 650/tonne in week 18, dipped below USD 6 800/tonne in week 21 and back up to USD 9 500/per tonne in week 25.
Cocoa is in a strong positive uptrend, with the price above both the Moving Average (MA) 50 and 200, both of which are pointing upwards. As of 20 June, the price stood at USD 9 494/tonne.
Hot drink, hotter market
Coffee shares many similarities with cocoa. Production of both commodities is concentrated in a few countries, in regions often exposed to extreme weather. In the case of coffee, the two largest producers are Brazil and Vietnam, which have suffered similar setbacks to cocoa. Vietnam, the world's second largest producer, has suffered a severe drought, which in turn has severely affected its coffee crops. In addition to the drought, Vietnamese coffee farmers are also hoarding the beans, hoping to benefit from even higher prices in the future, further driving down supply.
The coffee price is trading close to a 5-year high of 234 US Cents/pound as of 20 June. The price is in an upward trend, above MA 50 and 200. An important factor to watch going forward is Vietnam's weather conditions, which are expected to remain difficult.
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