Cocoa Prices Show Mixed Results Amid Quality Concerns and Demand Issues
On Friday, July ICE NY cocoa (CCN25) closed at +134 (+1.53%), while July ICE London cocoa #7 (CAN25) ended down -43 (-0.67%). This mixed closing reflects ongoing concerns in the market.
Quality Issues Affecting the Ivory Coast Mid-Crop
Cocoa prices are supported by worries over the quality of the Ivory Coast’s mid-crop, which is currently being harvested. Cocoa processors report rejecting truckloads of cocoa beans due to quality issues, noting that approximately 5% to 6% of the mid-crop cocoa in each truckload is subpar, compared to just 1% during the main crop.
Declining Demand and Sales Figures
Earlier in the week, cocoa prices fell to one-week lows due to demand concerns. Hershey Co. announced a -14% drop in Q1 sales and projected $15-$20 million in tariff costs for Q2, which could raise chocolate prices and further dampen consumer demand. In a similar vein, Mondelez International reported weaker-than-expected Q1 sales, attributing this decline to economic uncertainty and high chocolate prices, which lead consumers to cut back on snack purchases.
Cocoa prices are impacted by a report indicating a +24% year-over-year increase in Nigerian Mar cocoa exports, rising to 27,564 MT. As the world’s fifth-largest cocoa producer, this increase adds pressure on pricing.
Rising Cocoa Inventories
A rebound in cocoa inventories also weighs on prices. After hitting a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa inventories in US ports have surged to a seven-month high of 2,076,132 bags as of Friday.
Supply Concerns from the Ivory Coast
Last Friday, NY cocoa reached a two-and-a-half-month high due to supply concerns; the pace of cocoa exports from the Ivory Coast has slowed. Recent government data reveals that Ivory Coast farmers shipped 1.5 MMT of cocoa to ports from October 1 to April 27, a 12% increase from last year, but significantly less than the 35% increase reported in December.
Global Cocoa Demand Remains Steady
Despite some challenges, recent data showed better-than-expected global demand for cocoa. North American cocoa grindings fell -2.5% year-over-year to 110,278 MT, beating expectations of at least a -5% decline. Similarly, Q1 European cocoa grindings decreased -3.7% to 353,522 MT, and Q1 Asian grindings dropped -3.4% to 213,898 MT, both smaller declines than anticipated.
Mid-Crop Expectations and Market Perspectives
Concerns about the upcoming mid-crop are putting upward pressure on cocoa prices. Rabobank reported that late-arriving rains have hampered crop growth, and recent farmer surveys from the Ivory Coast and Ghana have yielded disappointing results. The average estimate for this year’s mid-crop stands at 400,000 MT, a 9% decrease from last year’s 440,000 MT.
Last month, NY cocoa fell to a one-month low, and London’s cocoa reached a five-month low, driven by fears over consumer demand amid escalating trade tensions and tariff impacts on already high cocoa prices. Barry Callebaut AG recently reduced its annual sales guidance, citing these very concerns.
Future Projections and Supply Concerns
A forecast from the International Cocoa Organization (ICCO) predicts a global cocoa surplus of 142,000 MT for 2024/25, marking the first surplus in four years. The ICCO also projects a +7.8% year-over-year increase in global cocoa production to 4.84 MMT.
Further supporting prices, Ghana, the world’s second-largest cocoa producer, is expected to reduce its harvest. Cocobod, Ghana’s cocoa regulator, has revised its harvest forecast for 2024/25 down to 617,500 MT, a 5% decrease from the previous August estimate of 650,000 MT.
Lastly, the ICCO’s report dated February 28 highlights a global cocoa deficit of -441,000 MT for 2023/24, the largest deficit in over 60 years. Cocoa production for this period is forecasted to have dropped -13.1% to 4.38 MMT, with global cocoa stocks/grindings ratio hitting 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.
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