Cocoa Prices Experience Minor Losses Amid Supply Concerns

July ICE NY cocoa (CCN25) is down -65 (-0.65%), while July ICE London cocoa #7 (CAN25) is down -8 (-0.11%). Today’s cocoa prices are witnessing slight declines as they consolidate gains from earlier this week, which saw prices reach 2-1/2 month highs on Tuesday.

Quality Concerns Impact Cocoa Prices

Recent sharp increases in cocoa prices are attributed to quality issues in the Ivory Coast’s mid-crop, now being harvested. Cocoa processors have expressed dissatisfaction with the crop quality, rejecting truckloads of beans. Reports indicate that 5% to 6% of mid-crop cocoa in each truckload is deemed poor quality, which is significantly higher than the 1% seen during the main crop.

According to Rabobank, this decline in quality is linked to delayed rainfall in the region, which restricted crop growth. The mid-crop, smaller than the main harvest, typically starts in April. This year, estimated production for the Ivory Coast’s mid-crop stands at 400,000 metric tons (MT), a 9% decrease from last year’s 440,000 MT.

Supply Chain Dynamics and Their Effects

Concerns regarding supply further bolster cocoa prices, as the pace of cocoa exports from the Ivory Coast has slowed. Recent government data reveal that farmers shipped 1.56 million MT this marketing year from October 1 to May 11, which is up 11.4% from last year. However, this is down from a much larger 35% increase reported in December.

On the other hand, a rebound in current cocoa inventories may pressure prices. Following a drop to a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa stocks in U.S. ports have risen to a 7-1/2 month high of 2,118,628 bags.

Consumer Demand and Economic Factors

Concerns about potential declines in consumer demand for cocoa products are contributing to lower prices, particularly as tariffs threaten to raise already elevated cocoa prices. On April 10, Barry Callebaut AG, a major chocolate manufacturer, reduced its annual sales forecast due to high cocoa prices and tariff uncertainties. Additionally, Hershey Co. reported a 14% drop in Q1 sales and anticipates $15-$20 million in tariff costs in Q2, which could further hinder consumer appetite. Mondelez International also noted weaker-than-expected sales due to economic instability and elevated chocolate prices.

Market Reactions and Global Demand Trends

Cocoa prices are also affected by a report from Bloomberg on April 28, indicating that Nigerian Mar cocoa exports rose by 24% year-on-year to 27,564 MT. Nigeria ranks as the world’s fifth-largest cocoa producer.

On a positive note, recent data suggests that global cocoa demand remains robust. Q1 North American cocoa grindings fell 2.5% year-on-year to 110,278 MT, better than an expected decline of at least 5%. Similarly, Q1 European cocoa grindings dropped 3.7% year-on-year to 353,522 MT, and Q1 Asian cocoa grindings fell by 3.4% to 213,898 MT—both smaller declines than previously anticipated.

Future Outlook: Surplus Predictions

The International Cocoa Organization (ICCO) on February 28 projected a global cocoa surplus of 142,000 MT for the 2024/25 period, the first surplus in four years. ICCO also forecasted a 7.8% year-on-year increase in global cocoa production, reaching 4.84 million MT.

Support for prices may arise from shrinking supplies in Ghana, the world’s second-largest cocoa producer. Ghana’s cocoa regulator, Cocobod, has revised its harvest forecast down to 617,500 MT, a decrease of 5% from the previous estimate of 650,000 MT.

On February 28, the ICCO announced a severe global cocoa deficit of 441,000 MT for the 2023/24 season, the largest in over 60 years. The organization reported that cocoa production had declined by 13.1% year-on-year to 4.380 million MT, with the current global stocks/grindings ratio at a 46-year low of 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.
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