Recent Cocoa Market Movements: Prices Rise Amid Supply Concerns

July ICE NY cocoa (CCN25) has seen a rise of +214 (+2.41%), while May ICE London cocoa #7 (CAK25) is up by +26 (+0.41%). Cocoa prices are trending moderately higher today but remain below the significant highs observed on Wednesday. On that day, NY cocoa hit a 2.5-month peak, while London cocoa reached a 2.5-week high due to ongoing supply concerns. Notably, recent reports indicate a slowdown in cocoa exports from Ivory Coast, which has further supported pricing. Government data released on Tuesday revealed that Ivory Coast farmers exported 1.48 million metric tons (MMT) of cocoa from October 1 to April 20, marking an 11.3% increase from last year, yet a decrease from the 35% increase noted in December.

Positive momentum in cocoa prices is also attributed to last week’s data showing higher-than-expected global cocoa demand. In Q1, North American cocoa grindings fell by 2.5% year-on-year to 110,278 MT, which was better than the anticipated decline of at least 5%. Similarly, Q1 European cocoa grindings decreased by 3.7% year-on-year to 353,522 MT, also lower than the predicted 5% drop. Additionally, Q1 Asian cocoa grindings reported a decline of 3.4% year-on-year to 213,898 MT, which was a smaller drop than the forecasted 5% fall.

Worries surrounding the upcoming mid-crop in Ivory Coast further bolster cocoa prices. On April 3, NY cocoa rose to a 2-month high following reports of weak mid-crop cocoa harvest prospects in West Africa. Rabobank reported that erratic rainfall in the region has stunted crop growth, leading to disappointing surveys from cocoa farmers in Ivory Coast and Ghana. The mid-crop, being the smaller of two annual cocoa harvests, is expected to begin this month with average projections for this year’s Ivory Coast mid-crop set at 400,000 MT, down 9% from last year’s 440,000 MT.

Inventories monitored by ICE held in US ports have seen a positive turnaround since reaching a 21-year low of 1,263,493 bags on January 24, climbing to a 6-month high of 1,925,933 bags as of Wednesday.

Earlier this month, NY cocoa hit a 1-month low and London cocoa fell to a 5-month low due to concerns that escalating global trade tensions might reduce consumer demand for cocoa and cocoa products, particularly as high cocoa prices surged in tandem with tariffs. On April 10, Barry Callebaut AG, a leading chocolate manufacturer, adjusted its annual sales forecast downwards in light of sky-high cocoa prices and uncertainty surrounding tariffs.

Despite the current upward momentum, an improving supply outlook poses a potential threat to cocoa prices. The International Cocoa Organization (ICCO) projected a global cocoa surplus of 142,000 MT for 2024/25, marking the first surplus in four years. They also forecast an increase in global cocoa production by 7.8% year-on-year, bringing it to 4.84 MMT.

Demand issues are starting to impact cocoa pricing as well. Executives from major chocolate companies like Hershey and Mondelez have expressed concerns that high cocoa prices are suppressing demand. Mondelez executives indicated on February 4 that there are signs of decreased cocoa consumption in regions such as North America. They further suggested that chocolate prices might rise by as much as 50% due to the escalating cocoa prices, potentially harming demand. Hershey, on February 6, acknowledged they are reformulating recipes due to high cocoa prices.

Challenges in supply from Ghana, the second-largest cocoa producer worldwide, have added upward pressure. Ghana’s cocoa regulator, Cocobod, has revised its 2024/25 cocoa harvest forecast downwards for the second time this season to 617,500 MT, a 5% decline from the earlier estimate of 650,000 MT.

The ICCO also reported on February 28 that the 2023/24 global cocoa deficit is at -441,000 MT, marking the largest deficit in over 60 years. Their figures indicated a 13.1% year-on-year reduction in production to 4.38 MMT, while the global cocoa stocks-to-grindings ratio reached a 46-year low at 27.0%.

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

More news from Barchart

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.