Cocoa Prices Surge as Demand Surpasses Expectations
Recently, there has been a notable rise in cocoa prices, with both the New York and London markets experiencing significant increases. This upward trend can be attributed to the latest indicators of global cocoa demand, which exceeded market expectations. For instance, during the first quarter, cocoa grindings in Europe saw a year-over-year decrease of 3.7%, totaling 353,522 metric tons. However, this decline was less than the anticipated 5%. Similarly, Asia reported a 3.4% drop in cocoa grindings, amounting to 213,898 metric tons, which also outperformed expectations of a minimum decline of 5%.
The cocoa market had previously faced some uncertainty. A week prior, cocoa prices hit a one-month low in New York and a five-month low in London due to fears surrounding consumer demand. Concerns were heightened by the escalation of global trade tensions and rising tariffs that could undermine cocoa affordability. In response to the challenging pricing environment, Barry Callebaut AG, one of the leading chocolate manufacturers, announced a revision of its annual sales forecast amid the high cocoa prices and uncertainty surrounding tariffs.
In conjunction with these developments, Malaysia reported a significant decline in cocoa processing, with a drop of 15.3% year-over-year in the first quarter, bringing the total to 84,192 metric tons. Meanwhile, Brazil’s cocoa bean grindings fell by 13% in the same period, totaling 52,135 metric tons. As these reports were released, cocoa market participants were closely monitoring cocoa grinding figures from Asia, Europe, and North America.
The supply outlook for cocoa has shown signs of improvement, further influencing cocoa prices. The International Cocoa Organization (ICCO) recently projected a global surplus of cocoa for the 2024/25 season, estimating it to be around 142,000 metric tons, marking the first surplus in four years. Additionally, ICCO forecasts a 7.8% year-over-year increase in global cocoa production, which will reach approximately 4.84 million metric tons.
Cocoa inventories have also begun to recover, contributing to price pressures. After hitting a 21-year low of 1,263,493 bags in January, ICE-monitored cocoa stocks in U.S. ports have risen, reaching a five-and-three-quarter month high of 1,891,200 bags.
In early April, cocoa prices saw a rise to a one-and-three-quarter month high, driven by expectations of a weak mid-crop harvest in West Africa. Analysts from Rabobank have cited adverse weather conditions, particularly late rains, which have hindered crop development. Recent surveys of cocoa farmers in the Ivory Coast and Ghana yielded disappointing results, leading to increased support for cocoa prices as the mid-crop season approaches.
Current projections for the Ivory Coast’s mid-crop, which begins this month, suggest a production estimate of 400,000 metric tons, representing a 9% decrease from the previous year’s harvest of 440,000 metric tons. Reports indicate that cocoa exports from the Ivory Coast have shown signs of slowing down, which has further supported cocoa prices. As of the latest government data, exports from October 1 to April 13 reached 1.45 million metric tons, reflecting a 10.7% rise from the previous year; however, this is a decrease from a 35% increase recorded in December.
Concerns surrounding demand have begun to weigh on cocoa pricing. Executives from prominent chocolate companies, including Hershey and Mondelez, have indicated that high cocoa prices may negatively impact market demand. For instance, Mondelez executives acknowledged signs of demand softening in North America, with a potential slowdown in chocolate consumption. They also warned of possible increases in chocolate prices, potentially up to 50%, as a result of soaring cocoa prices, which could further depress demand. Hershey has reported similar challenges, indicating they are adjusting their recipes to substitute cocoa with alternative ingredients.
The global cocoa landscape is nuanced, with reports from Nigeria showing a sharp 27% increase in January cocoa exports year-over-year, totaling 46,970 metric tons, affirming Nigeria’s status as the fifth-largest cocoa producer worldwide.
On the other hand, reduced cocoa supplies from Ghana, the second-largest producer, have provided support to cocoa prices. The Ghana Cocoa Board recently revised its 2024/25 harvest forecast downward, cutting the estimate to 617,500 metric tons, representing a 5% reduction from earlier predictions.
The ICCO also highlighted a significant global cocoa deficit of 441,000 metric tons for the 2023/24 season, marking the largest deficit in over six decades. The organization reported a 13.1% decrease in cocoa production compared to the previous year, totaling 4.38 million metric tons, along with a historically low cocoa stocks/grindings ratio of 27%.
