Cocoa Prices Drop Amid Mixed Harvest News
Cocoa prices fell again on Friday, marking the third consecutive day of declines and hitting a one-week low. December Iced New York Cocoa closed at -172 (-2.78%), while December Iced London Cocoa #7 ended at -112 (-2.53%). Prices have been on a downturn since reaching a five-week high earlier in the week, driven by optimism around a potentially strong cocoa crop in West Africa.
Farmers in Ivory Coast reported that their cocoa trees are thriving, thanks in part to dry weather that has helped with bean drying. Ghanaian cocoa farmers also noted that favorable weather has led to quicker bean development. Recently, Mondelez highlighted that the latest cocoa crop from West Africa is about 7% higher than the five-year average and significantly outpaces last year’s yield. Harvesting for the main crops in Ivory Coast has just commenced, and there’s a sense of optimism regarding the quality.
Earlier in the week, cocoa prices had surged to a five-week high following the announcement from Bloomberg Commodity Index (BCOM) that cocoa would be included in the index for the first time in 20 years starting in January. The total assets tracked by BCOM are around $109 billion, which means cocoa’s 1.7% weighting could lead to considerable inflows into the market as passive funds adjust their holdings. Data from Peak Trading Research LLC suggested that about $1.9 billion in cocoa futures would need to be purchased over the next 80 days due to this change.
A reduction in cocoa exports from Ivory Coast, the leading cocoa producer, is also bolstering prices. According to government statistics, Ivorian farmers shipped approximately 304,840 tonnes of cocoa from October 1 to November 2 this year, a decrease of 16% from 365,072 tonnes during the same period last year.
As cocoa stockpiles decline, prices are being supported. The total cocoa inventory monitored at U.S. ports by ICE dropped to 1,793,757 bags, the lowest level in the last seven and a half months.
However, fears surrounding rising prices and potential tariffs are contributing to price decreases, as there’s a growing concern about declining demand for chocolate. Sales of chocolate candy in North America fell by more than 21% in the 13 weeks leading up to September 7 compared to the previous year, according to Circana. Hershey’s CEO described their chocolate sales during this year’s Halloween season as “disappointing,” a critical time that typically generates almost 18% of annual U.S. candy sales, only second to Christmas.
On a global scale, cocoa demand seems to be weakening. The Asia Cocoa Association reported a 17% drop in cacao milling volume for the third quarter compared to last year, marking the lowest output for this time in nearly a decade. Similarly, the European Cocoa Association noted a 4.8% year-on-year decline in European cocoa crushing volumes during the same period, the least for a third quarter in ten years. In North America, while cocoa milling volume increased by 3.2% year-on-year, new reporting companies may have distorted the data.
On the production front, Cocoa Association of Nigeria has forecast a decline in Nigeria’s cocoa output, projecting 305,000 tonnes for 2025/26, an 11% drop from the estimated 344,000 tonnes for this current crop year. In September, Nigeria’s cocoa exports were reported flat at 14,511 tonnes compared to the previous year.
The International Cocoa Organization (ICCO) has updated its forecast for a global cocoa deficit in 2023/24 to 494,000 tonnes, the largest shortfall in six decades. They also indicated a 13.1% decline in production from last year, totaling 4.380 million metric tonnes. Additionally, ICCO stated that the current cocoa stock-to-crushed ratio has plummeted to 27.0%, the lowest in 46 years. Looking forward, they predict a cocoa surplus in 2024/25 of 142,000 tonnes, with production expected to rise by 7.8% that year.
