On Monday, July ICE NY cocoa (CCN25) closed at -450 (-4.79%), while May ICE London cocoa #7 (CAK25) dropped -200 (-3.08%).

Global Cocoa Supplies Increase

Cocoa prices fell sharply Monday following indications of larger global supplies. Bloomberg reported that Nigerian cocoa exports increased by 24% year-over-year, reaching 27,564 metric tons (MT). This positions Nigeria as the fifth-largest cocoa producer in the world.

Inventory Levels and Export Trends

A rebound in cocoa inventories is exerting bearish pressure on prices. ICE-monitored cocoa stocks in U.S. ports, which hit a 21-year low of 1,263,493 bags on January 24, have rebounded to a 6.5-month high of 1,987,423 bags as of Monday.

Prior to the recent drop, New York cocoa had reached a 2.25-month high amid concerns over supply. Data released on Monday indicated that Ivory Coast farmers shipped 1.5 million MT of cocoa from October 1 to April 27, marking a 12% increase compared to last year but a decrease from a more robust 35% rise reported in December.

Impact of Recent Cocoa Demand

Despite the recent downturn, cocoa prices benefited from better-than-expected global demand. In the first quarter, North American cocoa grindings decreased by only 2.5% year-over-year to 110,278 MT, surpassing projections of a 5% decline. Similarly, European cocoa grindings fell 3.7% year-over-year to 353,522 MT, and initial Asian grindings dropped 3.4% to 213,898 MT, all smaller decreases than anticipated.

Concerns Over Upcoming Harvests

Market concerns are mounting about the mid-crop in Ivory Coast. Rabobank indicated that late rains have hampered crop growth, and surveys among cocoa farmers in both Ivory Coast and Ghana have shown disappointing results. The average forecast for this year’s Ivory Coast mid-crop now stands at 400,000 MT, which is a 9% decrease from last year’s 440,000 MT.

Economic Factors Influencing Prices

Earlier this month, New York cocoa prices fell to a one-month low, while London cocoa reached a five-month low due to worries about diminishing consumer demand amid escalating global trade tensions and increasing tariffs on already pricey cocoa. On April 10, Barry Callebaut AG, a leading global chocolate producer, revised its annual sales forecasts downward, citing these elevated cocoa prices and tariff uncertainties.

Future Projections and Surplus Outlook

The International Cocoa Organization (ICCO) announced a forecast on February 28 of a global cocoa surplus of 142,000 MT for the 2024/25 season, the first surplus observed in four years. Additionally, ICCO projected a 7.8% year-over-year increase in global cocoa production for 2024/25, bringing the total to 4.84 million MT.

Lower cocoa yields from Ghana, the second-largest global producer, may assist in supporting prices. Ghana’s cocoa regulator, Cocobod, has twice lowered its harvest forecast for 2024/25 to 617,500 MT, a 5% reduction from a previous estimate of 650,000 MT.

Historical Context of Supply and Demand

The ICCO noted that the cocoa deficit for the 2023/24 season reached -441,000 MT, representing the largest deficit in over 60 years. Additionally, cocoa production declined 13.1% year-over-year, totaling 4.38 million MT for the season. The global cocoa stocks-to-grindings ratio was reported at 27.0%, hitting a 46-year low.

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 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.