Prices of cocoa on the international market have started to tumble due to investors’ expectations of pending increase in production from top producers, Côte d’Ivoire and Ghana.
For instance, the International Cocoa Organisation (ICO) is forecasting a surplus of 105,000 tonnes in the current 2017-18 marketing year, with global production estimated at 4.6million tonnes.
This expectation of increased harvest, coupled with lower demand from top importers in the UK has already started having an impact on the sector as the commodity lost $67.00 last two weeks to settle at $2,604.50 per metric tonne and subsequently dropped by an additional $110.5 last week to trade at $2,451.00 per metric tonne.
The prices continued to dip this week as the commodity lost an additional $60.00 to settle at $2,391.00 per metric tonne.
The continuous decline in the price of cocoa can take away the productive incentive and profitability, causing especially farmers to reduce their investment in the sector due to the fall.
Côte d’Ivoire, which is the world’s largest producer, is projecting a production of about 1.9 million tonnes, while Ghana, the second largest producer, is expected to produce 850,000 tonnes this season, something which the investors believe would contribute to a global surplus of the commodity.