Cocoa prices have seen a notable rise, with May ICE NY cocoa futures increasing significantly. This upward trend can be attributed to several factors impacting both supply and demand dynamics in the chocolate industry.
Recent export data from Côte d’Ivoire indicates a slowdown, which positively affects cocoa prices. From October 1 to April 20, farmers in the Ivory Coast exported 1.48 million metric tons (MMT) of cocoa, marking an 11.3% increase from the previous year. However, this figure is down from the remarkable 35% growth reported back in December.
Additionally, the cocoa market reflects a strong demand trend despite some fluctuations. The latest figures for Q1 indicate that North American cocoa grindings decreased by just 2.5% year-over-year to 110,278 MT, which is better than the anticipated 5% decline. Similarly, European grindings dropped by 3.7% to 353,522 MT, and Asian grindings fell by 3.4% to 213,898 MT—both smaller declines than initially predicted.
Concerns regarding the upcoming mid-crop from Côte d’Ivoire are contributing to the support of cocoa prices. Recently, signs of a weaker mid-crop harvest in West Africa pushed NY cocoa prices to a two-month peak. According to Rabobank, inconsistent rainfall has hindered crop growth, and surveys conducted among cocoa farmers in both the Ivory Coast and Ghana have yielded worrying results. This year’s mid-crop harvest, typically starting in April, is projected to be 400,000 MT, reflecting a 9% decrease compared to last year’s total of 440,000 MT.
Earlier this month saw cocoa prices dip, with NY cocoa dropping to a one-month low and London cocoa hitting a five-month low. These reductions were primarily due to fears that escalating global trade tensions would dampen consumer demand for cocoa and related products. Barry Callebaut AG, a leading chocolate manufacturer, recently revised its annual sales forecast downward, citing challenges such as elevated cocoa prices and growing tariff uncertainties.
Another factor influencing cocoa prices is the recovery in cocoa inventories. Stocks monitored by ICE in U.S. ports reached a six-month high of 1,905,025 bags, rebounding from a 21-year low recorded earlier this year. This improved supply outlook may put downward pressure on cocoa prices moving forward.
Moreover, the International Cocoa Organization (ICCO) has projected a global cocoa surplus of 142,000 MT for the 2024/25 season, marking the first expected surplus in four years. The ICCO has also estimated a 7.8% increase in cocoa production, reaching 4.84 MMT.
However, demand-related issues are still a concern. Executives from prominent chocolate manufacturers like Hershey and Mondelez reported that high cocoa prices are adversely affecting consumer demand. Mondelez mentioned a potential slowdown in chocolate consumption, particularly in North America. The company also warned that chocolate prices could surge by up to 50% due to steep cocoa costs, potentially reducing demand further. Hershey acknowledged that high cocoa prices are forcing the company to alter its recipes, substituting cocoa with alternative ingredients.
Further compounding the situation are diminishing cocoa supplies from Ghana, the second-largest cocoa producer globally. Ghana’s cocoa regulator, Cocobod, recently revised its harvest forecast for the 2024/25 season down to 617,500 MT, a 5% drop from earlier estimates of 650,000 MT.
As for the current market conditions, the ICCO declared that the global cocoa deficit for the 2023/24 season stood at 441,000 MT, the largest deficit in over 60 years. Production for this period was reported to have decreased by 13.1% year-on-year, totaling 4.380 MMT. The cocoa stocks-to-grindings ratio also hit a 46-year low at 27.0%, indicating tight supply conditions.
In summary, the cocoa market is currently facing several challenges influenced by supply constraints and fluctuating demand. Despite recent price gains, the outlook for cocoa products may remain uncertain as various factors continue to evolve.
