Cocoa Market Update: Current Trends and Future Outlook
Cocoa prices are experiencing a significant rise, with May contracts on the ICE NY cocoa market increasing by approximately 4.61% and those on the ICE London market rising by about 3.12%. This surge in cocoa prices comes amidst a weakening dollar, which has encouraged short-covering activities in cocoa futures. However, the rally in the British pound has restrained potential gains in London cocoa, as a stronger pound impacts cocoa prices measured in sterling.
Recent trends indicate volatility in cocoa prices. For instance, cocoa futures dropped to a three-week low in New York and a five-month low in London last Wednesday. Concerns over declining consumer demand for cocoa are mounting due to escalating global trade tensions, which have also resulted in rising tariffs that further strain cocoa prices. One major player in the chocolate industry, Barry Callebaut AG, recently revised its sales outlook due to soaring cocoa prices and increasing tariff uncertainty.
The cocoa market has faced downward pressure over the last two months, particularly on March 21 when New York cocoa fell to a nearly five-month low. The International Cocoa Organization (ICCO) projected a global surplus of cocoa for the 2024/25 season, estimating it at 142,000 metric tons—the first surplus in four years. Additionally, ICCO forecasts a 7.8% year-over-year increase in global cocoa production, anticipated to reach 4.84 million metric tons.
An increase in cocoa inventories has also contributed to the bearish outlook for cocoa prices. After hitting a 21-year low of 1,263,493 bags in January, ICE-monitored cocoa stocks at U.S. ports have rebounded significantly, totaling 1,868,177 bags—marking a five-and-a-half-month high.
Despite these adverse trends, cocoa prices received support from concerns about the upcoming mid-crop in the Ivory Coast, which is typically a smaller harvest occurring this time of year. The average forecast for this year’s mid-crop is around 400,000 metric tons, indicating a decline of approximately 9% from last year’s output of 440,000 metric tons.
Data from Ivory Coast’s government highlights a slowdown in cocoa exports. As of April 6, farmers had shipped 1.44 million metric tons this marketing year—an increase of 11% from the previous year but down from greater export growth registered earlier in the season.
Concerns about demand are also influencing the cocoa market. Executives from prominent chocolate manufacturers like Hershey and Mondelez have expressed worries that high cocoa prices are adversely affecting consumer demand. Mondelez’s CFO pointed out signs of decreased cocoa consumption, particularly in North America, while the company warned that chocolate prices might rise significantly—potentially curbing demand further.
In Nigeria, cocoa exports have shown surprising strength, as reported on February 27, with a 27% year-over-year increase to 46,970 metric tons. As the fifth-largest cocoa producer globally, Nigeria’s strong export performance contrasts with the weaker demand experienced in Western markets.
The high prices of cocoa have resulted in reduced consumption in the fourth quarter, as evidenced by quarterly grind reports. The European Cocoa Association reported a 5.3% year-over-year decrease in European cocoa grindings, hitting the lowest level in over four years. Similarly, Asian cocoa grindings fell slightly, while North American grindings reported a minor decline as well.
In Ghana, the world’s second-largest cocoa producer, production forecasts have been lowered for the 2024/25 season, with Cocobod revising its estimate down to 617,500 metric tons—5% less than initially projected. This reduction could help support cocoa prices, highlighting ongoing challenges within the cocoa supply chain.
According to ICCO’s recent findings, the 2023/24 global cocoa market is facing a substantial deficit of 441,000 metric tons—the largest in over six decades. Cocoa production has dropped significantly compared to previous years, leading to a stocks-to-grindings ratio at a 46-year low, further indicating the market’s tight supply situation.
The current landscape of the cocoa market reflects a complex interplay of production dynamics, demand fluctuations, and economic factors. Stakeholders are keeping a close eye on these trends as they unfold in both the short and long term.
