Cocoa Prices Surge Amid Mixed Global Demand Reports

May ICE NY cocoa (CCK25) rose by +402 (+4.81%) today, while May ICE London cocoa #7 (CAK25) is not trading due to the Easter Monday holiday in London.

Today’s rally has brought NY cocoa to a 2-week high, fueled by positive news regarding global cocoa demand from last week. In the first quarter, North American cocoa grindings decreased by -2.5% year-over-year (y/y) to 110,278 metric tons, performing better than the anticipated -5% y/y decline. Similarly, European cocoa grindings also decreased by -3.7% y/y to 353,522 metric tons, less severe than the expected -5% drop. Additionally, Asian cocoa grindings fell by -3.4% y/y to 213,898 metric tons, again a smaller drop than predicted.

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Earlier this month, both NY and London cocoa values fell significantly due to concerns over diminishing consumer demand as global trade tensions escalated, resulting in increased cocoa prices from tariffs. On April 10, Barry Callebaut AG, a leading chocolate manufacturer, reduced its annual sales guidance, citing the dual pressures of high cocoa costs and uncertainty from tariffs.

Additionally, a recent increase in cocoa inventories is exerting downward pressure on prices. Following a 21-year low of 1,263,493 bags recorded on January 24, ICE-monitored cocoa inventories in U.S. ports surged to a recent high of 1,891,200 bags last Thursday.

The outlook for cocoa supply appears negative for current prices. The International Cocoa Organization (ICCO) projected a global cocoa surplus of 142,000 metric tons for the 2024/25 season, marking the first surplus in four years. The ICCO also forecasts a +7.8% y/y rise in global cocoa production, reaching 4.84 million metric tons.

Concern surrounding the mid-crop in the Ivory Coast may provide some support to cocoa prices. On April 3, NY cocoa reached a 2-month high due to indications of a weak mid-crop harvest in West Africa. Rabobank noted that delayed rains have hindered crop development, with recent farmer surveys from Ivory Coast and Ghana revealing disappointing results. The mid-crop, which typically begins in April, is expected to yield 400,000 metric tons this year, a -9% reduction from last year’s 440,000 metric tons.

Shipping data from the Ivory Coast shows a slowdown in cocoa exports, further supporting current prices. The government reported last Monday that farmers exported 1.45 million metric tons of cocoa to ports during this marketing year from October 1 to April 13, marking a +10.7% increase compared to the previous year, albeit down from the larger 35% rise observed in December.

Amid these developments, chocolate industry executives from Hershey and Mondelez have raised concerns that high cocoa prices are dampening demand. Mondelez’s CFO Zarmella stated on February 4 that cocoa consumption is decreasing in some regions, particularly North America. The company warned on February 18 that chocolate prices could surge by up to 50%, which could further restrict demand. Hershey executives noted on February 6 that high cocoa prices compel them to alter recipes by substituting cocoa with other ingredients.

Additionally, on the bearish side, Nigeria reported on February 27 that its cocoa exports for January surged by +27% y/y to 46,970 metric tons, affirming its position as the world’s fifth-largest cocoa producer.

Conversely, reduced cocoa supplies from Ghana, the second-largest cocoa producer, are aiding price support. Ghana’s cocoa regulator, Cocobod, reduced its harvest forecast for 2024/25 to 617,500 metric tons, reflecting a -5% cut from an earlier estimate of 650,000 metric tons made in August.

The ICCO highlighted that the 2023/24 global cocoa deficit reached -441,000 metric tons, the largest deficit in over 60 years, with production down -13.1% y/y to 4.380 million metric tons. The global cocoa stocks-to-grindings ratio is currently at 27.0%, a 46-year low.

On the date of publication,
Rich Asplund
did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

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