On Tuesday, May ICE New York cocoa (CCK25) experienced a significant increase, closing at +500 (+5.68%). Meanwhile, May ICE London cocoa #7 (CAK25) also saw a rise, closing at +375 (+6.16%). This surge in cocoa prices resulted in two-week highs, primarily driven by a slowdown in cocoa exports from the Ivory Coast.
Recent government data reported that Ivory Coast farmers shipped approximately 1.48 million metric tons (MMT) of cocoa to ports during the marketing year, from October 1 to April 20. This reflects an 11.3% increase compared to last year, although it’s a decline from the larger 35% rise recorded in December. The slowdown in exports has created a supportive environment for cocoa prices.
Moreover, last week’s reports highlighted an unexpected increase in global cocoa demand, positively impacting prices. In the first quarter, North American cocoa grindings showed a smaller-than-expected decline of 2.5% year-over-year, totaling 110,278 metric tons. Similarly, European cocoa grindings dropped by 3.7% year-over-year, reaching 353,522 metric tons, which was less severe than the anticipated 5% decline. Additionally, Asian cocoa grindings decreased by 3.4% year-over-year, totaling 213,898 metric tons, which also surpassed expectations.
The outlook for the upcoming mid-crop in the Ivory Coast has added further support to cocoa prices. On April 3, New York cocoa prices increased to a two-month high due to concerns about a weak mid-crop harvest in West Africa. Reports from Rabobank indicated that late rains have impeded crop growth, leading to disappointing farmer surveys in the Ivory Coast and Ghana. Generally, the mid-crop production, which is the smaller of the two yearly cocoa harvests commencing this month, is projected to be 400,000 metric tons, reflecting a 9% drop from the previous year’s 440,000 metric tons.
Earlier in the month, cocoa prices displayed volatility with New York cocoa falling to a one-month low, and London cocoa hitting a five-month low. This decline was attributed to worries over potential decreases in consumer demand for cocoa products, exacerbated by escalating global trade tensions and tariffs that are already inflating cocoa prices. On April 10, Barry Callebaut AG, a major player in the chocolate industry, revised its annual sales outlook downwards due to prevailing high cocoa prices and tariff uncertainties.
Additionally, the recovery of cocoa inventories has exerted downward pressure on cocoa prices. After dipping to a 21-year low of 1,263,493 bags on January 24, cocoa inventories monitored by ICE at U.S. ports recovered and increased to a six-month high of 1,915,952 bags.
An improving supply situation poses a potential challenge for cocoa prices. The International Cocoa Organization (ICCO) projected a global cocoa surplus of 142,000 metric tons for the 2024/25 season, marking the first surplus in four years. Additionally, the ICCO forecasted a 7.8% year-over-year increase in global cocoa production, amounting to 4.84 million metric tons.
Concerns about demand remain prominent, placing pressure on cocoa prices. Executives from renowned chocolate manufacturers, including Hershey and Mondelez, voiced worries that elevated prices are curtailing consumer demand. Mondelez’s CFO Zarmella recently noted signs of decreasing cocoa consumption in regions like North America. They also warned that increased cocoa prices could lead to a rise in chocolate prices of up to 50%, which would likely deter consumers. Similarly, Hershey indicated that high cocoa prices necessitate recipe adjustments, often substituting cocoa with alternative ingredients.
In Ghana, the second-largest cocoa producer globally, a decrease in expected cocoa supplies supports price levels. Cocobod, Ghana’s cocoa regulatory body, reduced its harvest forecast for the 2024/25 season for the second time this year, estimating a production of 617,500 metric tons, which is a 5% decrease from the earlier prediction of 650,000 metric tons.
Furthermore, the ICCO reported a striking cocoa deficit of 441,000 metric tons for the 2023/24 season, the largest seen in over 60 years, with production dropping by 13.1% year-over-year to 4.38 million metric tons. The ICCO also indicated that the ratio of global cocoa stocks to grindings is at a 46-year low of 27.0%, presenting additional challenges within the cocoa market.
