Cocoa Prices Outlook - Q1 2021

With the March-2021 (MAR-21) and the May-2021 (MAY-21) futures contracts still active in February, the focus for this review remains on these two contracts as listed on ICE Futures Europe (London) and ICE Futures U.S. (New York).

Expected key market developments for February 2021 are presented. Figure 1 shows price movements on the London and New York futures markets respectively at the London closing time during February 2021 while Figure 2 presents the same information during February 2020.


Following the trend set in the preceding month, both the London and New York markets continued to be in backwardation during February 2021. As depicted in Figure 1, the front-month contract (MAR-21) continued to price above MAY-21 on both sides of the Atlantic. The London and New York markets recorded an average premium of US$ 144 per tonne and US$ 96 per tonne respectively. It is noteworthy that, a year ago, the two nearest cocoa futures contracts were in contango in London whereas a combination of contango and backwardation was observed in New York (Figure 2).

During the period under review, the nearby contract prices in London averaged US$ 2,467 per tonne, down by 4% compared with the average price ofUS$ 2,560 per tonne for the first position contract recorded during the corresponding period a year ago. In New York, the nearby cocoa contract averaged US$ 2,568 per tonne in February 2021; representing a 11% plunge compared to US$ 2,872 per tonne recorded over the same period of the previous crop year.

The global supply excess in addition to a low demand for cocoa products amidst the COVID-19 pandemic maintained cocoa prices at levels lower than observed last season.

From the start of the month under review to 17 February, prices of the MAR-21 contract oscillated in London and New York. Prices ranged between US$ 2,351 and US$ 2,455 per tonne in London, and between US$ 2,435 and US$ 2,678 per tonne in New York. At the time, favourable meteorological conditions were reported to support production. Furthermore, with the aim of reviving sales, the Ivorian government announced a reduction in the price of their export licences for the 2021 / 22 cocoa season. Thereafter, cocoa prices followed an upward trend, thanks to the extension of the global rollout of vaccines and improved prospects of containment of the pandemic, which raised the optimism in the demand for most commodities including cocoa. In reaction to these bullish factors, futures prices soared on both markets, climbing by 9% from US$ 2,442 to US$ 2,666 per tonne and by 6% from US$ 2,385 to US$ 2,599 per tonne in London and New York respectively.


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