Rollercoaster: Cocoa Prices Surge Above $10,000 A Ton As Global Supply Fears Worsen

The great Cocoa crash from mid-April to the first half of May seems to have ended. Recall prices crashed 45% in that time after a massive multi-month run-up on global supply fears. Now, prices have surged 57% from the $6.767k/ton low, breaking over the $10k mark and printing as high as $11k during today’s intra-day session.

Commodity trader Pierre Andurand, who turned cocoa bull in March, is most likely ecstatic with the price action of the bean in New York in recent weeks, especially this week’s surge.

Andurand recently spoke with Bloomberg’s Odd Lots hosts Tracy Alloway and Joe Weisenthal about a sliding inventory-to-grinding ratio that could ignite “a real shortage of cocoa beans.” His price target for the bean is still at the $20k mark for later this year or next.

“Market volatility is also influenced by a lack of liquidity, with the number of outstanding contracts continuing to shrink. The wild daily price jumps and high margin requirements are seen making it costlier for traders to maintain their positions, prompting many to walk away,” Bloomberg noted.

Adding to global cocoa supply fears was a report from Reuters on Wednesday detailing how one of the world’s top producers, Ghana, has considered delaying delivery of up to 350,000 tons of cocoa beans for next season due to poor harvests.

Michael McDougall, managing director at Paragon Global Markets, told Bloomberg Thursday that cocoa bean arrivals date indicate “production issues continue to plague the market and lack of investment catching up as yields are suffering due to aging trees.”

McDougall warned, “It won’t be resolved quickly for sure.”

Earlier this week, Bloomberg reported that Ivory Coast, the world’s top bean producer, has begun tightening domestic bean sales to prioritize local processors as supplies dwindle due to a bad harvest across West Africa.

Here are our latest bean reports:

• Cocoa Bull Pierre Andurand Warns Of ‘Price Explosion’ If Stock-To-Grinding Ratio Collapses
• Global Cocoa Shortage Much Worse Than Previously Forecasted As Prices Surge
• Cocoa Mess: Ivory Coast Bans Some Bean Sales As Global Supplies Tighten Further

The news from West Africa is certainly worsening supply fears for the bean as prices near record highs.

However, Rabobank analyst Paul Joules recently told clients cocoa prices have likely peaked.

So, prices have peaked? Or is Andurand correct, and prices head to $20k?