Cocoa Market Update: Prices Mixed Amid Export Concerns and Demand Slowdown
On Monday, May ICE NY cocoa (CCK25) closed up +138 (+1.66%), whereas May ICE London cocoa #7 (CAK25) slightly declined, down -3 (-0.05%). Cocoa prices exhibited a mixed outcome as the market grapples with concerns about slowing exports from Ivory Coast.
Export Dynamics and Price Influence
The latest government figures indicate that Ivory Coast farmers shipped 1.40 million metric tons (MMT) of cocoa to ports from October 1 to March 9. This marks a 15% increase from last year. However, the pace of shipments has moderated from a remarkable 35% rise seen in December, providing some support for cocoa prices.
London cocoa experienced a dip on Monday as it relinquished earlier gains, closing lower after the British pound (^GBPUSD) surged to a four-month high. The strengthening of the pound diminishes the attractiveness of cocoa priced in sterling, contributing to the price decline.
Supply Outlook and Inventory Levels
Recent weeks have seen cocoa prices soften, hitting a 3.5-month low last Tuesday amid an improved supply outlook. On February 28, the International Cocoa Organization (ICCO) projected a global cocoa surplus of 142,000 MT for the 2024/25 marketing year—the first surplus in four years. ICCO also forecasted a 7.8% year-over-year increase in global cocoa production, projecting it to rise to 4.84 MMT.
Bearish market sentiment is heightened by rising cocoa inventories. After hitting a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa stocks in U.S. ports rebounded to a 3.25-month high of 1,530,893 bags on Monday.
Regional Supply Issues and Demand Challenges
Nigeria, the world’s fifth-largest cocoa producer, reported a staggering +27% year-over-year increase in cocoa exports for January, reaching 46,970 MT. This development further adds bearish pressure on cocoa prices.
Concerns regarding cocoa demand are also prevalent. Recent statements from executives at Hershey and Mondelez indicate that high cocoa prices are dampening demand. Mondelez CFO Zarmella noted signs of declining cocoa consumption, especially in North America. The company has cautioned that chocolate prices could potentially rise by 50%, likely curbing consumer demand. In a similar vein, Hershey has indicated it may reformulate products to offset high cocoa prices.
Grinding Reports Reflect Declining Demand
The impact of elevated cocoa prices was evident in the Q4 grinding reports. The European Cocoa Association reported a significant -5.3% year-over-year decline in European cocoa grindings, totaling 331,853 MT—marking the lowest volume seen in over four years. Similarly, the Cocoa Association of Asia recorded a slight -0.5% year-over-year decrease to 210,111 MT, also a four-year low, while North America exhibited a -1.2% year-over-year decline to 102,761 MT.
Ghana’s Crop Outlook and Global Cocoa Deficits
Supportive factors for cocoa prices arise from decreased supply forecasts from Ghana. In December, Cocobod revised its 2024/25 cocoa harvest estimate down to 617,500 MT, reflecting a 5% cut from the previous August forecast of 650,000 MT.
The ICCO highlighted a staggering cocoa deficit of -441,000 MT for the 2023/24 marketing year, marking the largest shortfall in over 60 years. Additionally, they reported that global cocoa production fell -13.1% year-over-year to 4.380 MMT and that the cocoa stocks-to-grindings ratio currently stands at 27.0%, the lowest level in 46 years.
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 are solely for informational purposes. For further information, please view the Barchart Disclosure Policy here.
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