Shortage is structural! Goldman Sachs calls: Go long on cocoa!

Supply concerns reignite, New York cocoa futures hit a record high.

Due to ongoing worries about global supply shortages, on Monday, New York cocoa futures prices rose by 5.5% during intraday trading, reaching USD 11,925 per ton, surpassing the previous record of USD 11,722 per ton set in April, marking a new historical high.

Goldman Sachs commodity derivatives analyst Hugo Fuentes stated in a recent report:

“Due to structural supply deficits, insufficient consumer hedging, and historically low inventory levels, cocoa prices are expected to rise significantly.”

“Considering the limited supply from non-major producing regions, active short covering, and room for speculative buying, the market may see a new round of price increases.”

The report indicated that production in major cocoa-producing regions is expected to remain low, while limited supply from non-major regions is insufficient to alleviate market shortages.

In the first half of this year, cocoa production in West Africa, the main producing area, significantly declined due to adverse weather and other natural factors, leading to a third consecutive year of supply shortages, with New York cocoa futures prices nearly doubling since the beginning of the year.

Currently, production forecasts for the main producing region, Côte d'Ivoire, have been revised down from 1.9-2 million tons in July to 1.75 million tons, roughly in line with last year's low level of 1.73 million tons; Ghana's current production expectations have also been lowered from 650,000 tons in July to 550,000 tons, far below the normal level of 700,000 tons, while supply from non-major regions, including Nigeria, Ecuador, and Cameroon, is very limited.

Moreover, data shows that inventory levels at ICE New York warehouses are at historical lows, unable to meet the ongoing supply gap, while cocoa semi-finished product inventories (powder, butter, blocks) are also depleted, leading to a global supply gap that has widened to 200,000 tons, more severe than last year, potentially further escalating supply tensions.

In the market, relevant data indicates that outstanding short contracts continue to decline, meaning that short positions are being forced to cover significantly, and large-scale buying will further intensify upward price pressure. Additionally, the long positions of professional investment funds have halved from this year's peak to 40,000 lots, indicating that cocoa has not yet been "overbought."

Earlier this year, renowned commodity trader Pierre Andurand boldly predicted that cocoa would rise to USD 20,000 or more, believing that “the true shortage of cocoa beans” has not yet materialized, and once it does, “that will be the time when prices truly explode.”