By Adam Graves, Global Risk Management Inc.

If you are an avid follower of world agricultural developments, or follower of world weather trends in general, then you are well aware that 2020/21 has seen a La Nina weather pattern. In mid-December, Global Risk Management’s Patrick Sparks gave some insight into the “often referenced but frequently misunderstood” global weather event where a certain part of the Pacific Ocean experiences cooling surface temperatures. A La Nina has different impacts on various crops in various parts of the world – as it relates to cocoa production in West Africa, the La Nina pattern tends to bring wetter weather to the region and has historically occurred during West Africa’s hotter and drier season that tends to run from November through March. Wetter weather has a propensity to benefit cocoa production and is helpful in developing higher quality/larger cocoa beans.

So, what has a La Nina weather pattern historically meant for cocoa production in Ivory Coast and Ghana, the world’s two largest producers? Let’s take a look at the figures:

Of the five La Nina years since 1980, three saw a rise in Ivory Coast and Ghana cocoa production from the prior year. The three La Nina years where production rose saw an average YOY increase of 22%. In the two years in which production declined, the YOY average change was only a minimal -0.6%. Overall, production in a La Nina season has exceeded the prior year by an average of 13%. This compares quite favorably to the non-La Nina season average of a 4% YOY increase. There is a growing consensus in the market that 20/21 production out of the two highest output countries will meet or exceed that of 19/20, which would be in-line with expectations for a La Nina year. We eagerly await the initial 20/21 ICCO production forecast, which will be released at the end of the month in their quarterly update and will certainly be a factor in determining the cocoa futures price outlook going forward.

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