Cocoa Prices Dip Amid Mixed Market Signals
March ICE NY cocoa futures fell 2.14%; London cocoa also sees declines.
On Friday, March ICE NY cocoa (CCH25) closed down -222 points, or -2.14%. Meanwhile, March ICE London cocoa #7 (CAH25) also fell -156 points, reflecting a -1.91% decline. Earlier this week, prices had surged due to concerns about West African cocoa crops.
In the world’s leading cocoa-producing countries, Ivory Coast and Ghana, inconsistent rainfall over the past two weeks has hindered tree growth and flowering. Farmers are worried that this weather pattern could impact future cocoa supplies.
Despite the challenges, there are factors supporting cocoa prices. The Ivory Coast has exported 1.32 million metric tons (MMT) of cocoa to ports as of February 9, marking a 21% increase from the previous year. However, this rate of growth has slowed from the 35% increase reported in December.
Recently, cocoa prices have experienced pressure and dipped to two-month lows. Chocolate manufacturer Hershey announced last Thursday that the high costs of cocoa are compelling the company to alter its recipes, replacing cocoa with alternative ingredients. Similarly, Mondelez International’s CFO Zarmella indicated a potential downturn in chocolate consumption, notably in North America.
High cocoa prices have led to declining demand, as highlighted by recent quarterly grinding reports. The European Cocoa Association noted on January 9 that Europe’s Q4 cocoa grindings decreased by 5.3% year-over-year (y/y), totaling 331,853 MT—the lowest amount seen in over four years. Furthermore, the Cocoa Association of Asia reported a slight decrease of 0.5% y/y in Q4 cocoa grindings, totaling 210,111 MT. North America also saw its cocoa bean grindings fall by 1.2% y/y to 102,761 MT during the same period.
Conversely, dwindling global cocoa inventories are providing some support for prices. ICE-monitored cocoa stockpiles in US ports have been declining for the past 1.5 years, reaching a 21-year low of 1,263,493 bags on January 24.
Moreover, concerns over the West African cocoa harvest are contributing to bullish sentiments for prices. Maxar Technologies reported that this year’s Harmattan winds are the driest in six years, which is adversely affecting crop conditions. Farmers in Ivory Coast and Ghana have noticed that cocoa trees are showing signs of distress, with yellowing leaves and wilting pods.
On a less optimistic note, the Ivory Coast’s regulatory body, Le Conseil Cafe-Cacao, raised its production estimate for the 2024/25 cocoa season to between 2.1 and 2.2 MMT, up from June’s estimate of 2.0 MMT.
In contrast, Ghana’s Cocoa Board (Cocobod) cut its forecast for the 2024/25 season to 650,000 MT from a previous estimate of 700,000 MT due to adverse weather and disease. This year’s Ghanaian cocoa harvest was reported to be just 425,000 MT, the lowest yield in 23 years, revealing the country’s struggles in the cocoa sector.
Additionally, the International Cocoa Association (ICCO) on November 22 raised its estimate for the global cocoa deficit in 2023/24 to -478,000 MT, the largest shortfall in over 60 years, adjusting down from May’s projection of -462,000 MT. The ICCO also revised its 2023/24 cocoa production estimate down by 13.1% y/y to 4.380 MMT, predicting the lowest global cocoa stocks/grindings ratio in 46 years 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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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