Cocoa Market Update: Mixed Prices Amid Supply Concerns
On Monday, July ICE NY cocoa (CCN25) closed down by -97 (-1.06%), while July ICE London cocoa #7 (CAN25) rose by +55 (+0.83%). The cocoa market showed mixed pricing primarily due to fluctuations in exchange rates. A rally in the dollar (DXY00) to a 1-month high adversely impacted NY cocoa prices, whereas a decline in the British pound (^GBPUSD) to a 4-week low benefited London cocoa prices.
Inventory Levels and Quality Concerns Affect Prices
A rebound in cocoa inventories could exert downward pressure on prices. ICE-monitored cocoa inventories in U.S. ports, which had hit a 21-year low of 1,263,493 bags on January 24, have since increased to a 7-1/2 month high of 2,112,402 bags as of last Friday. At the same time, quality issues regarding the Ivory Coast’s mid-crop are currently emerging. Cocoa processors have reported that approximately 5% to 6% of the mid-crop beans in each truckload are of poor quality, contrasting with just 1% seen during the main crop.
Rabobank attributes the poor quality of the Ivory Coast’s mid-crop to late-arriving rain that hampered growth. The mid-crop, which is smaller than the main harvest, usually begins in April, with this year’s average estimate set at 400,000 MT—down 9% from last year’s 440,000 MT.
Consumer Demand and Economic Pressures
Near-term upward movement in cocoa prices appears limited due to concerns about consumer demand for cocoa products amidst escalating global trade tensions and increased tariffs. On April 10, Barry Callebaut AG, one of the largest chocolate manufacturers worldwide, reduced its annual sales forecast amid rising cocoa costs and tariff uncertainties. Additionally, Hershey Co. reported a 14% drop in Q1 sales and expected $15-$20 million in tariff-related costs for Q2, which could further burden consumer demand. Similarly, Mondelez International noted weaker-than-expected Q1 sales, indicating consumers are reducing snack purchases due to economic uncertainties and high chocolate prices.
Export Trends and Global Demand
On April 25, NY cocoa reached a 2-3/4 month high due to supply concerns linked to slow export rates from the Ivory Coast. Recent government data revealed that Ivory Coast farmers shipped 1.56 MMT of cocoa from October 1 to May 11—up 11.4% from last year, but a decrease from the previous 35% increase noted in December.
Market factors also include negative impacts from Bloomberg’s report on April 28, which indicated that Nigerian March cocoa exports increased by 24% year-over-year to 27,564 MT, highlighting Nigeria’s status as the fifth-largest cocoa producer.
Future Outlook and Supply Concerns
Despite the bearish signals from the International Cocoa Organization (ICCO), which forecasted a global cocoa surplus of 142,000 MT for 2024/25, the market is still taking note of various influencing factors. The ICCO projected a 7.8% increase in global cocoa production to 4.84 MMT for 2024/25.
Moreover, a reduction in cocoa supplies from Ghana, the second-largest cocoa producer, adds some bullish sentiment to cocoa prices. Cocobod, Ghana’s cocoa regulator, has lowered its 2024/25 cocoa harvest forecast for the second time this season to 617,500 MT, down 5% from an earlier estimate of 650,000 MT.
Conclusion: Current Market Dynamics
The ICCO reported a significant cocoa deficit of 441,000 MT for 2023/24, marking the highest deficit in over 60 years, with production dropping 13.1% year-over-year to 4.380 MMT. Additionally, the cocoa stocks-to-grindings ratio stands at 27.0%, the lowest in 46 years.
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 details, please view the Barchart Disclosure Policy.
