Cocoa Prices Experience Modest Gains Amid Supply Concerns
Cocoa prices are reflecting a slight increase, with July ICE NY cocoa climbing by 2.41% and May ICE London cocoa rising by 0.41%. Although these prices are showing a positive trend, they still fall short of reaching the highs observed earlier this week. On Wednesday, NY cocoa soared to a 2.5-month peak while London cocoa touched a point not seen in over two and a half weeks, primarily due to worries regarding supply.
One significant factor influencing cocoa prices is the decrease in cocoa exports from the Ivory Coast. Recently released government data indicated that farmers from this West African nation exported approximately 1.48 million metric tons of cocoa from October 1 to April 20. While this figure represents an 11.3% increase compared to last year, it shows a notable reduction from a staggering 35% increase recorded in December.
Moreover, a positive outlook for cocoa remains established due to encouraging demand reports from the previous week. The first quarter showed that cocoa grindings in North America decreased by 2.5% year-over-year to 110,278 metric tons. This development, however, was better than projections, which had anticipated at least a 5% decline. Similarly, European cocoa grindings in Q1 were down by 3.7% year-over-year, dropping to 353,522 metric tons, while grindings in Asia fell by 3.4% to 213,898 metric tons, both showing less severe drops than expected.
Further supply concerns are heightened as the mid-crop season is approaching, which typically yields lower production levels. Reports indicate that inadequate rains have hampered growth in cocoa crops from the Ivory Coast and Ghana, leading experts to express fears of a weak harvest. The anticipated mid-crop harvest for this year is expected to be around 400,000 metric tons, reflecting a 9% decrease compared to last year’s 440,000 metric tons.
In the United States, cocoa stocks observed a rebound after hitting a 21-year low earlier this year. As of now, ICE-monitored inventories in U.S. ports have risen to a six-month high of nearly 1.93 million bags. Despite the recent uptick in stock levels, earlier this month saw cocoa prices sinking to their lowest points in a month, driven by concerns about consumer demand dropping in response to escalating tensions in global trade and resulting tariffs that have only added fuel to the fire of already high cocoa prices. Contrarily, leading chocolate manufacturer Barry Callebaut AG has lowered its annual sales expectations as a result of the rising cocoa prices and tariff uncertainties.
Analysts predict a possible shift in supply dynamics that could negatively impact cocoa prices. The International Cocoa Organization (ICCO) has suggested a forecast indicating a global cocoa surplus for the 2024/25 market year, with output anticipated to increase by 7.8% year-over-year, marking the first surplus in four years.
Concerns surrounding waning cocoa demand continue to pressure prices downward. Executives from major chocolate companies, such as Hershey and Mondelez, have voiced concerns regarding high cocoa costs that could hamper consumption. In comments earlier this year, Mondelez’s CFO indicated signs of dipping cocoa consumption in North America. Furthermore, rising chocolate prices may reach up to 50% in response to soaring cocoa costs, potentially curtailing demand. In light of these challenges, Hershey has even begun revising its recipes, substituting cocoa for alternative ingredients to cope with the expenses.
Meanwhile, diminishing cocoa supplies from Ghana, the second-largest cocoa producer globally, have somewhat buoyed prices. Ghana’s cocoa controller, Cocobod, revised its forecast for the nation’s 2024/25 cocoa harvest downward, projecting a harvest of 617,500 metric tons, which is a 5% reduction from earlier estimates.
Additionally, ICCO has reported the largest cocoa deficit in over six decades, with the 2023/24 harvest revealing a shortfall of 441,000 metric tons. Global cocoa production dropped by 13.1% year-over-year to 4.38 million metric tons, with the stock-to-grindings ratio standing at a 46-year low of 27.0%.
As trends in cocoa prices and market demand continue to evolve, both producers and consumers across the globe remain watchful for developments that could shift the cocoa landscape significantly.
