Cocoa Prices Drop Amid Demand Concerns and Supply Issues

July ICE NY cocoa (CCN25) closed down -144 (-1.62%) on Thursday, while July ICE London cocoa #7 (CAN25) fell -95 (-1.47%). Cocoa prices settled lower, but remained above the one-week lows recorded on Wednesday.

Impact of Hershey’s Sales Decline on Cocoa Prices

Concerns over demand are weighing heavily on cocoa prices. Hershey Co. reported a -14% decline in Q1 sales and expects $15-$20 million in tariff costs for Q2, leading to higher chocolate prices and reduced consumer demand. Similarly, Mondelez International announced disappointing Q1 sales, citing that consumers are cutting back on snack purchases due to economic uncertainty and elevated chocolate prices.

Market Dynamics and Inventory Levels

Cocoa prices are experiencing a negative carryover effect following a Bloomberg report indicating that Nigerian March cocoa exports rose by +24% year-on-year to 27,564 MT. Nigeria ranks as the world’s fifth-largest cocoa producer.

A rebound in U.S. cocoa inventories is also bearish. After reaching a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa inventories at U.S. ports rose to a six-and-a-half month high of 2,044,096 bags on Thursday.

Last Friday, NY cocoa achieved a two-and-a-quarter month high amid worries about supply, as the pace of cocoa exports from the Ivory Coast has slowed. Government data from Monday revealed that Ivory Coast farmers shipped 1.5 MMT of cocoa from October 1 to April 27, a +12% increase from last year but significantly lower than the +35% rise seen in December.

Mixed Signals from Cocoa Grinding Data

Despite the inventory challenges, cocoa prices received some support from improved global cocoa demand news. North American cocoa grindings for Q1 fell -2.5% year-on-year to 110,278 MT, a better performance than the anticipated -5% decline. Similarly, Q1 European cocoa grindings decreased by -3.7% to 353,522 MT, and the Q1 Asian cocoa grindings fell by -3.4% to 213,898 MT, both outcomes more favorable than previous forecasts.

Concerns About the Mid-Crop in Ivory Coast

Worries about the upcoming mid-crop in the Ivory Coast are also influencing cocoa prices. Rabobank reports that late rains in the region have hindered crop growth, with recent surveys of cocoa farmers in the Ivory Coast and Ghana yielding disappointing results. The mid-crop harvest, generally smaller and starting this month, is expected to reach 400,000 MT, down -9% from last year’s 440,000 MT.

Earlier this month, NY cocoa hit a one-month low, while London cocoa fell to a five-month low due to fears of declining consumer demand tied to escalating trade tensions and tariffs that are pushing cocoa prices higher. On April 10, Barry Callebaut AG, a major chocolate manufacturer, lowered its annual sales guidance amid rising cocoa prices and tariff uncertainties.

Global Cocoa Production Forecasts

Adding to the bearish outlook, the International Cocoa Organization (ICCO) projected a global cocoa surplus of 142,000 MT for the 2024/25 season, the first surplus in four years. The ICCO also estimated that global cocoa production will increase by +7.8% year-on-year to 4.84 MMT.

On a positive note, decreasing cocoa supplies from Ghana, the second-largest cocoa producer, should support prices. Cocobod, Ghana’s cocoa regulator, has reduced its harvest forecast for 2024/25 for the second time this season to 617,500 MT, down -5% from an earlier estimate of 650,000 MT.

The ICCO’s analysis highlighted a significant deficit of -441,000 MT for the 2023/24 season, marking the largest deficit in over 60 years. It also noted a -13.1% year-on-year drop in cocoa production to 4.380 MMT, with the global cocoa stocks-to-grindings ratio at 27.0%, the lowest in 46 years.

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

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