Cocoa Prices Climb Amid Concerns Over Ivory Coast Exports

May ICE NY cocoa (CCK25) closed on Monday up +314 (+4.04%), while May ICE London cocoa #7 (CAK25) rose +243 (+4.00%).

Cocoa Prices Surge on Export Concerns

On Monday, cocoa prices surged as worries about declining cocoa exports from the Ivory Coast triggered short covering in cocoa futures. Recent government data indicated that Ivorian farmers shipped 1.43 million metric tons (MMT) of cocoa to ports this marketing year from October 1 to March 23, reflecting a 12% increase from last year. However, this growth rate has diminished significantly from the 35% surge recorded in December.

Recent Trends in Cocoa Supply

For the past five weeks, cocoa prices have been under pressure, hitting a 4-1/4 month low last Friday due to an improved supply outlook. The International Cocoa Organization (ICCO) projected on February 28 a global cocoa surplus of 142,000 MT for the 2024/25 season—the first surplus in four years. Furthermore, ICCO expects global cocoa production to rise 7.8% year-over-year, reaching 4.84 MMT.

Additionally, the recovery of cocoa inventories adds to downward pressure on prices. Since plunging to a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa stocks in U.S. ports rebounded to a 4-1/2 month high of 1,784,552 bags as of last Friday.

Nigeria also contributed to the bearish outlook. The country reported a 27% year-on-year increase in cocoa exports for January, totaling 46,970 MT, solidifying its status as the world’s fifth-largest cocoa producer.

Mid-Crop Concerns Provide Support for Prices

While concerns persist regarding the Ivory Coast’s upcoming mid-crop, this uncertainty is limiting large price declines. The mid-crop is smaller compared to the main harvest and typically commences in April. Current forecasts for this year’s mid-crop estimate production at 400,000 MT, which is 9% lower than last year’s figure of 440,000 MT.

Demand Issues Impacting Cocoa Prices

Demand concerns are also weighing heavily on cocoa prices. Executives from chocolate manufacturers such as Hershey and Mondelez have warned that high cocoa prices are stifling demand. On February 4, Mondelez’s CFO, Zarmella, highlighted a potential slowdown in consumption, particularly in North America, stating, “We are seeing signs where cocoa consumption is coming down.” The company also indicated on February 18 that chocolate prices may rise by as much as 50% due to increased cocoa costs, potentially affecting demand.

Similarly, on February 6, Hershey executives revealed that elevated cocoa prices are compelling them to alter recipes, substituting cocoa with other ingredients.

Grindings Reports Indicate Reduced Demand

The impact on demand is evident in recent quarterly grinding reports. The European Cocoa Association reported a 5.3% year-on-year drop in Q4 European cocoa grindings, which fell to 331,853 MT—the lowest level in over four years. In Asia, the Cocoa Association reported a minor decline of 0.5% year-over-year, with Q4 grindings hitting 210,111 MT, also a four-year low. Furthermore, North America’s cocoa bean grindings decreased by 1.2% year-over-year to 102,761 MT in Q4.

Supply Forecasts from Ghana Support Prices

Meanwhile, decreased supplies from Ghana, the second-largest cocoa producer globally, are favoring price stability. Ghana’s cocoa regulator, Cocobod, recently revised its cocoa harvest forecast for 2024/25 down to 617,500 MT, a 5% decrease from its August estimate of 650,000 MT.

Global Cocoa Production and Deficits

The ICCO revealed on February 28 that the global cocoa deficit for the 2023/24 season is projected at 441,000 MT—marking the largest deficit in over 60 years. Cocoa production is expected to fall 13.1% year-over-year to 4.38 MMT, with the global cocoa stocks-to-grindings ratio sitting at 27.0%, a record low for the past 46 years.

On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more 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.