Cocoa Prices Drop Amid Supply Fluctuations and Weather Challenges

March ICE NY cocoa (CCH25) is down -174 (-1.88%), while March ICE London cocoa #7 (CAH25) has decreased by -194 (-2.54%).

Today, cocoa prices are softer due to increased supplies from Nigeria, which is the world’s sixth-largest cocoa producer, prompting traders to sell off positions in futures. Exports from Nigeria in October climbed by +15% year-over-year, reaching 20,508 metric tons. The decline in London cocoa prices was further driven by a rise in the British pound (^GBPUSD) to a one-week high, negatively impacting cocoa priced in sterling.

In the past week, cocoa prices had surged due to uncertainties regarding future supplies. Last Friday marked a 2.5-month high for NY cocoa and a 4.25-month high for London cocoa, as heavy rains in the Ivory Coast led to high mortality rates in cocoa buds. Adverse weather conditions across West Africa have caused cocoa prices to surge sharply. Heavy rains flooded fields, increased disease risk, and compromised crop quality. Recently harvested beans from the Ivory Coast showed lower quality, with counts nearing 105 beans per 100 grams. The Ivory Coast regulatory body allows bean counts ranging from 80 to slightly more than 100 for export; lower counts reflect higher quality.

The trend of dwindling global cocoa stocks is providing upward pressure on prices. ICE-monitored cocoa inventories in U.S. ports have decreased steadily over the past 1.5 years, reaching a low of 1,571,470 bags—a 19-year record—on Tuesday.

On the bearish side, a rise in cocoa supplies from the Ivory Coast, the globe’s top cocoa producer, has contributed to price drops. Recent government data showed that farmers in the Ivory Coast shipped 642,500 metric tons of cocoa to ports between October 1 and November 24, marking a +34% increase from 415,523 metric tons during the same period last year. Moreover, Le Conseil Cafe-Cacao, the Ivory Coast’s regulatory body, on October 18 adjusted its production estimate for 2024/25 to a range of 2.1 to 2.2 million metric tons from June’s 2.0 million metric tons forecast.

Mixed signals also emerged from global cocoa demand reports. On October 17, the National Confectioners Association noted that North American cocoa grindings for the third quarter increased by +12% year-over-year to 109,264 metric tons. Similarly, the Cocoa Association of Asia reported a +2.6% rise in Q3 cocoa grindings, totaling 216,998 metric tons. However, the European Cocoa Association stated that third-quarter cocoa grindings in Europe fell by -3.3% year-over-year to 354,335 metric tons.

Cocoa received some support when Ghana’s Cocoa Board (Cocobod) revised its production estimate for 2024/25 down to 650,000 metric tons from a previous forecast of 700,000 metric tons. Ghana has experienced its lowest cocoa harvest in 23 years, with a figure of just 425,000 metric tons for 2023/24, attributed to adverse weather and crop diseases. As the second-largest cocoa producer, Ghana’s harvest for 2024/25 commenced in October.

Adding to the bullish factors is the International Cocoa Association (ICCO), which on August 30 projected a global cocoa deficit of -462,000 metric tons for 2023/24, an increase from May’s estimate of -439,000 metric tons, marking the largest deficit in over six decades. The ICCO also reduced its production forecast to 4.330 million metric tons, down from May’s estimate of 4.461 million metric tons, predicting the global cocoa stocks-to-grindings ratio would fall to a 46-year low of 27.4%.

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

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.