Cocoa prices are currently experiencing fluctuations, with New York cocoa marking a rise, while London cocoa prices are dipping. The increase in New York cocoa represents a notable one-month high, which is primarily attributed to concerns regarding a weaker cocoa harvest in West Africa. Reports indicate that delayed rainfall in this key cocoa-producing region has adversely affected crop yield. Specifically, assessments of cocoa farms in the Ivory Coast and Ghana have shown disappointing results.
The upcoming mid-crop period, which is usually the smaller of two yearly cocoa harvests, has raised concerns among traders. The mid-crop is expected to commence this month, with forecasts estimating the Ivory Coast’s production to hit around 400,000 metric tons. This projection reflects a 9% decline from last year’s figures of 440,000 metric tons.
Export trends from the Ivory Coast reveal a slowdown in shipments, lending further support to cocoa prices. Official governmental statistics indicate that between October 1 and March 30, farmers exported 1.44 million metric tons of cocoa, representing an 11% increase from the previous year. However, this figure is significantly lower than the 35% surge observed in December.
Despite recent increases, cocoa prices have seen declines over the past several weeks, reaching a four-and-a-half-month low at the end of March due to an outlook for improved supply conditions. In February, 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. The ICCO also forecasts a year-over-year global production increase of 7.8% to 4.84 million metric tons.
Another factor influencing prices is the recovery of cocoa inventories. The stock levels in U.S. ports began to rise after hitting a 21-year low in January. Recently, these inventories climbed to a five-and-a-half-month high, signaling a shift in supply dynamics.
Worries about declining global cocoa demand are also putting pressure on prices. Executives from leading chocolate manufacturers such as Hershey and Mondelez have reported that rising cocoa prices are negatively impacting demand for chocolate products. In early February, Mondelez noted that regions like North America are showing signs of reduced cocoa consumption. Additionally, they indicated that potential increases in chocolate prices—up to 50% due to cocoa’s rising cost—could further dampen demand. Hershey has also been prompted to alter its recipes to substitute cocoa with alternative ingredients due to high cocoa prices.
The cocoa market in Nigeria, the fifth-largest producer globally, has shown a different trend, with reports indicating a staggering 27% year-over-year increase in cocoa exports for January. This rise adds to the complexity of the current cocoa market dynamics.
Recent quarterly grinding reports indicate that high cocoa prices have led to a downturn in cocoa demand. The European Cocoa Association revealed that their fourth-quarter cocoa grindings decreased by 5.3% year-over-year, reaching the lowest levels seen in over four years. Similarly, the Cocoa Association of Asia reported a minor decline of 0.5% in fourth-quarter grindings, while North America’s grindings also reflected a small decrease of 1.2%.
In Ghana, the second-largest cocoa producer globally, revised forecasts for the 2024/25 cocoa harvest have emerged, with estimates now at 617,500 metric tons—down by 5% from earlier predictions. This smaller supply may lend support to cocoa prices in the coming months.
The ICCO’s latest declarations point to a significant global cocoa deficit of 441,000 metric tons for the 2023/24 season, marking the most substantial deficit in over six decades. Furthermore, the organization reported a year-over-year production decrease of 13.1%, leading to a historic low in the global cocoa stocks-to-grindings ratio.
The evolving situation in the cocoa market stems from a combination of unpredictable weather patterns, shifts in supply and demand dynamics, and economic pressures. As market participants continue to navigate these challenges, cocoa prices remain an area of significant interest for traders and consumers alike. Managers and stakeholders will need to keep a close watch on these developments, as they will likely impact future pricing and supply strategies in the cocoa industry.
