NY Cocoa Prices Surge amid Mixed Global Demand Indicators

On Monday, May ICE NY cocoa (CCK25) increased by +445 (+5.32%) while May ICE London cocoa #7 (CAK25) did not trade due to the Easter Monday holiday in London. This rise in NY cocoa marked a two-week high, boosted by last week’s reports indicating improved global cocoa demand.

Grindings Data Supports Cocoa Prices

In the first quarter, North American cocoa grindings fell by -2.5% year-over-year to 110,278 metric tons, outperforming the anticipated decline of -5%. Similarly, European cocoa grindings decreased by -3.7% year-over-year to 353,522 metric tons, a smaller dip than the expected -5% drop. Asian cocoa grindings also fell by -3.4% year-over-year to 213,898 metric tons, again exceeding forecasts that predicted a worse decline.

Earlier in the month, NY cocoa had hit a one-month low, with London cocoa reaching a five-month low. Concerns regarding consumer demand for cocoa products amid escalating global trade tensions and increased tariffs had been prevalent. On April 10, Barry Callebaut AG, a leading chocolate manufacturer, lowered its annual sales forecasts, citing high cocoa prices and tariff uncertainties.

Inventories and Supply Outlook

The recent recovery in cocoa inventories could weigh on cocoa prices. ICE-monitored cocoa inventories held in U.S. ports, which fell to a 21-year low of 1,263,493 bags on January 24, have since rebounded to 1,905,025 bags, a six-month high as of Monday.

Furthermore, the International Cocoa Organization (ICCO) has projected a global cocoa surplus of 142,000 metric tons for 2024/25, marking the first surplus in four years. ICCO also forecasts a 7.8% year-over-year increase in global cocoa production to 4.84 million metric tons in 2024/25.

Weather Concerns and Market Reactions

Nevertheless, concerns about the upcoming mid-crop in the Ivory Coast are offering some support to cocoa prices. On April 3, NY cocoa rose to a two-month high as indicators suggested a weak mid-crop harvest in West Africa. Rabobank reported that insufficient late-season rains could hinder crop development, and surveys from cocoa farmers in the Ivory Coast and Ghana revealed disappointing results. The mid-crop, which is typically smaller, is expected to yield around 400,000 metric tons this year, down 9% from last year’s 440,000 metric tons.

Recent data also indicates that Ivory Coast cocoa exports have slowed, which may support prices. Government figures released last Monday noted that farmers shipped 1.45 million metric tons of cocoa to ports from October 1 to April 13, a 10.7% increase from last year, but less than the robust 35% increase experienced in December.

Demand Concerns Persist

Demand concerns continue to affect cocoa prices. Executives from leading chocolate companies, including Hershey and Mondelez, have reported that rising prices are negatively impacting consumer demand. Mondelez’s CFO, Zarmella, noted signs of declining cocoa consumption, particularly in North America, during a February earnings call. They also warned on February 18 that chocolate prices could surge by up to 50% due to the rising cocoa costs, which may further suppress chocolate demand. In response to high cocoa prices, Hershey has also indicated it would reformulate its product recipes to incorporate fewer cocoa ingredients.

Contrastingly, Nigeria’s cocoa exports increased significantly, with a 27% year-over-year rise reported on February 27, totaling 46,970 metric tons. As the world’s fifth-largest cocoa producer, this growth reflects differing regional performance.

Meanwhile, smaller crop estimates from Ghana, the second-largest cocoa producer globally, further support cocoa prices. Ghana’s cocoa regulatory body, Cocobod, recently revised the harvest forecast for 2024/25 downwards to 617,500 metric tons, a reduction of 5% from earlier estimates.

According to the ICCO, the global cocoa deficit for the 2023/24 season is projected at -441,000 metric tons, the largest deficit in over 60 years. Cocoa production for this season decreased by 13.1% year-over-year to 4.38 million metric tons, and the global cocoa stocks/grindings ratio reached a 46-year low at 27.0%.

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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy
here.

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