Cocoa Prices Decline Amid Surplus Forecasts and Demand Concerns
May ICE NY cocoa (CCK25) has decreased by -191 (-2.29%), while May ICE London cocoa #7 (CAK25) has dropped -141 (-2.17%).
Cocoa Prices Respond to Supply Outlook
Today, cocoa prices reversed an early advance and fell due to expectations of a global cocoa surplus. Over the past two weeks, cocoa prices have been under pressure, recently reaching four-month lows due to an improving supply outlook. As of February 28, the International Cocoa Organization (ICCO) predicted a global cocoa surplus of 142,000 MT for the 2024/25 season, marking the first surplus in four years. The ICCO also anticipates a 7.8% annual increase in global cocoa production, totaling 4.84 million MT.
Inventory Recovery and Export Trends
The increase in cocoa inventories is contributing to the downward price trend. Stocks monitored by ICE at U.S. ports experienced a rebound, rising from a 21-year low of 1,263,493 bags on January 24 to a three-and-a-half-month high of 1,578,902 bags this Wednesday. Additionally, Nigeria reported a significant boost in cocoa exports on February 27, with January exports rising by 27% year-on-year to 46,970 MT, reinforcing its position as the world’s fifth-largest cocoa producer.
Supportive Factors Amidst Demand Challenges
Despite positive updates on Nigeria’s exports, concerns regarding slowing exports from the Ivory Coast provide some support for prices. Government data released last Monday indicated that farmers in the Ivory Coast shipped 1.40 million MT of cocoa to ports from October 1 to March 9, which is a 15% increase from last year. However, this growth has slowed compared to a 35% rise recorded in December.
Demand Wanes as Prices Remain High
Ongoing demand concerns continue to pressure cocoa prices. Executives from Hershey and Mondelez have expressed that rising prices are negatively impacting demand. On February 4, Mondelez’s CFO stated, “We are seeing signs, particularly in parts of the world like North America, where cocoa consumption is coming down.” Furthermore, on February 18, the company warned that chocolate prices may surge by as much as 50% due to increased cocoa costs, potentially reducing consumer demand. Similarly, Hershey cited high cocoa prices as necessitating recipe changes, including substituting cocoa with other ingredients.
Declining Cocoa Grindings Reflect Reduced Demand
High cocoa prices have negatively affected demand in the fourth quarter, as reported in quarterly grinding data. The European Cocoa Association reported a -5.3% decrease in Q4 European cocoa grindings, totaling 331,853 MT—the lowest figure in over four years. Similarly, the Cocoa Association of Asia noted a -0.5% decline in Q4 grindings to 210,111 MT, also a four-year low. In North America, the National Confectioners Association recorded a -1.2% decrease, resulting in 102,761 MT of grindings in Q4.
Ghana’s Forecast and Global Supply Dynamics
Support for cocoa prices is also stemming from smaller supplies from Ghana, the world’s second-largest cocoa producer. In December, Ghana’s cocoa regulator, Cocobod, reduced its forecast for the 2024/25 cocoa harvest to 617,500 MT, a 5% decrease from the previous estimate of 650,000 MT. Moreover, the ICCO reported on February 28 that the global cocoa deficit for 2023/24 reached -441,000 MT, the largest deficit in over 60 years. The ICCO also highlighted a -13.1% year-on-year decline in production, bringing total production down to 4.380 million MT. The global cocoa stocks/grindings ratio now stands at a 46-year low of 27.0%.
On the date of publication, Rich Asplund did not hold positions in any of the securities mentioned in this article. All information and data presented are for informational purposes only. For further details, please view the Barchart Disclosure Policy here.
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