As of today, May ICE NY cocoa (CCK25) has increased by +790 (+9.66%), while May ICE London cocoa #7 (CAK25) has risen by +476 (+7.55%).
Cocoa prices have reached one-month highs due to indications of a weaker mid-crop cocoa harvest in West Africa. Rabobank reports that late rains in the region have hindered crop development, and recent surveys of cocoa farmers in the Ivory Coast and Ghana have yielded unsatisfactory results.
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Concerns regarding the upcoming mid-crop in the Ivory Coast are driving cocoa prices upward. The mid-crop, the smaller of the two annual cocoa harvests, typically starts this month. Current projections estimate the Ivory Coast’s mid-crop at 400,000 MT, a 9% decrease from last year’s figure of 440,000 MT.
Slower cocoa exports from the Ivory Coast have also contributed to rising prices. Government data released on Tuesday indicates that farmers exported 1.44 MMT of cocoa to ports this marketing year, spanning October 1 to March 30. This reflects an 11% increase from the previous year but is down from the more substantial 35% rise recorded in December.
After experiencing a downturn for the past seven weeks, cocoa prices hit a 4.5-month low on March 21 due to an improving supply outlook. On February 28, the International Cocoa Organization (ICCO) projected a global cocoa surplus of 142,000 MT for the 2024/25 season, marking the first surplus in four years. ICCO also anticipates a 7.8% annual increase in global cocoa production for 2024/25, reaching 4.84 MMT.
The rebound in cocoa inventories adds to the bearish sentiment regarding prices. Following a 21-year low of 1,263,493 bags on January 24, cocoa stocks monitored by ICE at U.S. ports have increased, climbing to a five-and-a-quarter month high of 1,855,268 bags as of Tuesday.
Worries about demand are also overshadowing cocoa prices. Executives from chocolate manufacturers Hershey and Mondelez have recently highlighted that high prices are negatively impacting demand. On February 4, Mondelez’s CFO Zarmella noted potential signs of decreased chocolate demand in regions like North America, stating, “We are seeing signs… where cocoa consumption is coming down.” Furthermore, on February 18, the company alerted that chocolate prices might rise by as much as 50% due to soaring cocoa prices, which could decrease chocolate consumption. Hershey executives, on February 6, indicated that high cocoa prices are prompting recipe reforms, replacing cocoa with alternative ingredients.
Adding to the bearish outlook, Nigeria announced on February 27 that its cocoa exports in January soared by 27% year-on-year to 46,970 MT, solidifying its position as the world’s fifth-largest cocoa producer.
In Q4, high cocoa prices dampened demand, as evidenced by quarterly grinding reports. The European Cocoa Association reported a 5.3% year-on-year decline in Q4 European cocoa grindings to 331,853 MT, the lowest in over four years. Similarly, the Cocoa Association of Asia noted a slight dip of 0.5% year-on-year in Q4 Asian cocoa grindings, totaling 210,111 MT, also marking a four-year low. Additionally, the National Confectioners Association reported a 1.2% year-on-year decline in Q4 North American cocoa bean grindings to 102,761 MT.
Decreased cocoa supplies from Ghana, the world’s second-largest cocoa producer, are somewhat supportive of prices following Cocobod’s decision in December to downgrade its Ghana 2024/25 cocoa harvest forecast for the second time this season to 617,500 MT, which is a 5% reduction from the earlier estimate of 650,000 MT.
On February 28, ICCO reported a global cocoa deficit of 441,000 MT for the 2023/24 season, marking the largest deficit in over 60 years. ICCO also stated that cocoa production for 2023/24 fell by 13.1% year-on-year to 4.38 MMT and that the global cocoa stocks/grindings ratio stood at 27.0%, the lowest in 46 years.
At the time of publication,
Rich Asplund
did not hold any positions, directly or indirectly, in any of the securities mentioned in this article. All information and data in this article are intended for informational purposes only. For further details, please refer to the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
Cocoa prices have recently surged to one-month highs, with May ICE NY cocoa (CCK25) climbing by 9.66% and May ICE London cocoa #7 (CAK25) increasing by 7.55%. This uptick in price is attributed to concerns surrounding a weak mid-crop cocoa harvest expected in West Africa, particularly in the Ivory Coast and Ghana. Rabobank has indicated that delayed rains have hampered crop growth, and recent farmer surveys from these regions have yielded disappointing results.
The mid-crop in the Ivory Coast, typically beginning this month, is particularly under scrutiny. Current estimates predict this year’s mid-crop yield at approximately 400,000 metric tons, down 9% from last year’s harvest of 440,000 metric tons. Additionally, cocoa exports from the Ivory Coast have been sluggish, with farmers shipping 1.44 million metric tons from October 1 to March 30—a slight increase from last year, but considerably less than the robust 35% growth observed in December.
Cocoa prices had shown a downtrend over the previous seven weeks, falling to 4.5 month lows on March 21 amid improved supply outlooks. Earlier in the year, the International Cocoa Organization (ICCO) forecasted a global cocoa surplus of 142,000 metric tons for the 2024/25 period, the first surplus in four years, predicting a 7.8% increase in production to a total of 4.84 million metric tons. Furthermore, cocoa inventories in US ports have rebounded from a 21-year low and reached a 5.25-month high of 1,855,268 bags.
Despite the recent price surge, there are ample concerns about cocoa demand. Executives from major chocolate manufacturers, including Hershey and Mondelez, have expressed worries that high cocoa prices could slow down demand for chocolate. Mondelez’s CFO recently noted declining cocoa consumption in North America, and further warned that escalating cocoa prices could push chocolate prices up by as much as 50%, adversely affecting demand. In a similar vein, Hershey indicated that the rising costs were forcing the company to alter its recipes to reduce cocoa content, which could have long-term implications.
Additionally, data from Nigeria, the world’s fifth-largest cocoa producer, highlighted a 27% year-on-year rise in cocoa exports in January to 46,970 metric tons. This increase adds more complexity to the cocoa market dynamics. The high prices observed in the fourth quarter of last year also correlated with reduced cocoa demand, as evidenced by grinding reports. The European Cocoa Association reported a 5.3% year-on-year decrease in cocoa grindings in Q4, marking the lowest figures in over four years. Similarly, declines were noted in both Asian cocoa grindings (-0.5% year-on-year) and North American grindings (-1.2% year-on-year) during the same period.
Further, cocoa forecasts from Ghana—a significant cocoa producer—continue to support higher prices amidst anticipated lower supplies. Ghana’s cocoa regulator, Cocobod, revised its 2024/25 harvest forecast down to 617,500 metric tons, a 5% reduction from earlier estimates. Compounding these issues, the ICCO reported a staggering global cocoa deficit of 441,000 metric tons for 2023/24—the largest deficit recorded in over sixty years—and indicated that production for this period fell 13.1% year-on-year to 4.38 million metric tons. This situation has contributed to a low global stocks/grindings ratio of 27.0%, the lowest in 46 years.
In conclusion, while recent price increases in cocoa are driven by concerns about a weak mid-crop harvest and supply shortages from key producers, the market is also grappling with significant demand challenges due to rising cocoa prices and their effects on chocolate production. The evolving landscape of cocoa supply and demand will likely continue to influence pricing and market dynamics in the near future.
