Cocoa Markets Show Mixed Signals Amid Demand and Supply Concerns

July ICE NY cocoa (CCN25) closed down -4 (-0.04%) on Wednesday, while May ICE London cocoa #7 (CAK25) recorded a rise of +160 (+2.53%).

Market Overview

On Wednesday, cocoa prices hit one-week lows but settled with mixed results. Initially, prices dropped due to demand concerns. Chocolate maker Mondelez International reported Q1 sales that fell short of expectations. The company noted that consumers are dialing back on snack purchases amid economic uncertainties and rising chocolate costs.

Weather Concerns Impact Prices

Short covering helped stabilize cocoa prices on Wednesday, driven by weather concerns in West Africa. Cocoa farmers in Ivory Coast reported that strong winds had damaged cocoa trees, while Nigerian farmers noted a lack of ripe pods due to inconsistent rainfall and prolonged dry spells.

Supply Chain Developments

Additionally, cocoa prices have been negatively affected since Monday, following Bloomberg’s report on a 24% year-over-year increase in Nigerian Mar cocoa exports, totaling 27,564 metric tons. Nigeria stands as the world’s fifth-largest cocoa producer.

On the supply side, a rebound in cocoa inventories could put downward pressure on prices. After dropping to a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa inventories in U.S. ports have risen to a six-and-a-half-month high of 2,036,303 bags.

Shifts in Global Cocoa Demand

Last Friday, NY cocoa reached a two-and-a-quarter month high amid supply concerns due to a slowdown in exports from Ivory Coast. According to recent government data, farmers in Ivory Coast shipped 1.5 million metric tons of cocoa from October 1 to April 27, a 12% increase from last year, although this marks a decline from the earlier 35% hike noted in December.

Despite recent concerns, cocoa prices have received some support from better-than-anticipated global demand. For instance, Q1 North American cocoa grindings fell 2.5% year-over-year to 110,278 metric tons, less than the expected 5% decline. European cocoa grindings also showed a smaller than anticipated drop of 3.7% year-over-year to 353,522 metric tons, while Asian cocoa grindings fell 3.4% to 213,898 metric tons.

Crop Outlook and Economic Pressures

Concerns regarding the upcoming mid-crop in Ivory Coast continue to influence cocoa prices. Rabobank reported that late rains in the region hindered crop development. Recent farmer surveys in both Ivory Coast and Ghana have yielded disappointing results. The mid-crop, which begins this month, is expected to yield around 400,000 metric tons, down 9% from last year’s 440,000 metric tons.

Cocoa prices faced pressure earlier this month, with NY cocoa hitting a one-month low and London cocoa dropping to a five-month low. These declines stemmed from fears that rising tariffs and escalating trade tensions would dampen consumer demand for cocoa products. Barry Callebaut AG, a leading chocolate producer, lowered its annual sales guidance due to high cocoa prices and tariff uncertainties.

Global Cocoa Supply and Demand Projections

A bearish forecast by the International Cocoa Organization (ICCO) indicated a global cocoa surplus of 142,000 metric tons for the 2024/25 season, marking the first surplus in four years. The ICCO also projected a 7.8% year-over-year increase in global cocoa production to 4.84 million metric tons.

Decreased cocoa supplies from Ghana, the second-largest cocoa producer, could support prices. In December, Cocobod, Ghana’s cocoa regulator, revised its 2024/25 cocoa harvest forecast downward for the second time this season, now estimating it at 617,500 metric tons—5% lower than the previous forecast of 650,000 metric tons.

The ICCO reported that the global cocoa deficit for 2023/24 reached an alarming 441,000 metric tons, the largest deficit in over 60 years. Production during this period fell 13.1% year-over-year to 4.38 million metric tons, leading to a stocks-to-grindings ratio of 27.0%, a 46-year low.

On the date of publication, Rich Asplund did not have any positions in any of the securities mentioned in this article. All information and data are for informational purposes only. For more, please view the Barchart Disclosure Policy
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The views and opinions expressed herein reflect those of the author and do not necessarily represent those of Nasdaq, Inc.