On Tuesday, cocoa prices dropped significantly, with December ICE NY Cocoa (CCZ25) closing down 273 points, or about 4.47%, and December ICE London Cocoa #7 (CAZ25) down 206 points, a decline of 4.73%. This slump marks a four-week low for New York cocoa and a three-week low for London cocoa.
The prices have been decreasing after reaching a six-week peak last Tuesday, driven by optimistic forecasts of a strong cocoa yield in West Africa. Farmers in the Ivory Coast reported that their cocoa trees are thriving, thanks to recent dry spells that have aided the drying process of the beans. Similarly, Ghanaian farmers noted that favorable weather has sped up the development of their cocoa beans.
Recently, chocolate manufacturer Mondelez indicated that the latest West African cocoa yield is around 7% higher than the average of the past five years and significantly exceeds last year’s figures. With the harvesting of main crops in the Ivory Coast kicking off, farmers are feeling hopeful about the quality of their produce.
However, the market sentiment remains bearish due to a decline in global cocoa demand. The CEO of Hershey pointed out on October 30 that Halloween sales this year were “disappointing.” Given that Halloween typically accounts for nearly 18% of annual candy sales in the U.S., this is rather concerning. In Asia, the Cocoa Association revealed that cacao milling volume for the third quarter fell 17% compared to last year, marking the lowest levels in nearly a decade. Meanwhile, European cocoa crushing volumes dropped by 4.8% in the same timeframe, which is also the lowest in ten years. Conversely, North American cocoa milling rose by 3.2% year-over-year, but this figure might be skewed due to the addition of new reporting companies. Additional data suggests that chocolate sales in North America have plummeted by more than 21% in the 13 weeks ending September 7 compared to the previous year.
On a more positive note, a decline in cocoa exports from the Ivory Coast—an essential producer—could support prices. From October 1 to November 8, Ivorian farmers exported 411,979 tonnes, a 9% decrease from the 454,624 tonnes recorded during the same timeframe last year.
Moreover, there’s a notable increase in short positions in London Cocoa, which could potentially push prices up. Last week, the Commitment of Traders (COT) report mentioned that funds increased their net short positioning in London Cocoa significantly, to the highest levels seen in over four years. Due to the current U.S. government shutdown, data on New York Cocoa positions isn’t available at the moment.
Short covering had been sparked by news on October 30 about cocoa’s re-inclusion in the Bloomberg Commodity Index (BCOM) after a 20-year absence. This change is anticipated to lead to substantial inflows of capital, estimated at about $1.9 billion in cocoa futures over the next 80 days, especially considering the index’s total asset value was around $109 billion at the close of 2024.
The decline in ICE cocoa reserves also supports price levels. Cocoa stocks under ICE scrutiny at U.S. ports have dipped to 1,786,616 bags, the lowest reserve seen in over seven months.
An ongoing decline in cocoa production in Nigeria, the fifth-largest producer worldwide, may also play a role in supporting prices. The Cocoa Association of Nigeria forecasts a drop in production for the 2025/26 season to 305,000 tonnes, down 11% from the anticipated 344,000 tonnes earlier set for the 2024/25 crop year. Reportedly, Nigerian cocoa exports remained stable year-on-year in September at 14,511 tonnes.
In May, the International Cocoa Organization (ICCO) highlighted a projected global cocoa deficit of 494,000 tonnes for the 2023/24 year, the most significant shortfall in over six decades. They reported a 13.1% drop in global cocoa production from the previous year, totaling 4.380 MMT, with the stock-to-crushed ratio falling to its lowest in 46 years. Looking ahead, ICCO estimates a global cocoa surplus of 142,000 tonnes for the 2024/25 crop year, a first in four years, with production expected to rise by 7.8% to 4.84 MMT.
