Cocoa Prices Drop Amidst Mixed Market Factors
On Friday, the ICE NY Cocoa (CCH26) concluded down by 123 points (-2.33%), while the December ICE London Cocoa #7 (CAZ25) fell by 97 points (-2.50%).
Cocoa prices saw a notable decline on Friday, reaching a 1.75-year low in London. This downward trend can be attributed to pressures stemming from the European Union’s proposal to extend deforestation regulations for another year. Known as the EUDR, these regulations aim to combat deforestation associated with imports of commodities like cocoa and soy. The extension, expected by late December, is likely to alleviate supply worries, permitting EU nations to continue sourcing agricultural goods from regions in Africa, Indonesia, and South America where deforestation persists.
Additionally, expectations of a bountiful cocoa harvest in West Africa are contributing to falling prices. Farmers in the Ivory Coast report that favorable dry weather is enhancing the growth of their cocoa trees, while in Ghana, the improved weather conditions are leading to faster development of beans.
Moreover, Mondelez, a well-known chocolate manufacturer, stated that West Africa’s latest cocoa crop is 7% above the five-year average and significantly exceeds last year’s yield. The main harvesting season in the Ivory Coast has just commenced, with farmers feeling optimistic about the quality of their crops.
Price pressure continues as the previous administration’s decision to remove a 10% tariff on non-U.S. goods, including cocoa, comes into play.
Weak global demand for cocoa is also weighing heavily on prices. The Hershey Company’s CEO expressed disappointment in this year’s Halloween chocolate sales, which are critical as Halloween represents nearly 18% of U.S. candy sales annually, only behind Christmas. Moreover, the Asia Cocoa Association indicated that cacao milling volume in Asia dropped 17% year-on-year in the third quarter, reaching the lowest level for that period in nine years. Meanwhile, European cocoa crushing volumes in the same timeframe decreased by 4.8% year-on-year, marking the lowest quarter in a decade. Although North American cocoa milling volume increased by 3.2% year-over-year, the figures were likely skewed due to new reporting entities. In another troubling sign, North American chocolate candy sales fell by over 21% in the 13 weeks leading up to September 7 compared to the same period last year, according to Circana’s data.
Nonetheless, dwindling ICE cocoa stockpiles are providing some support. Cocoa reserves monitored at U.S. ports fell to 1,733,345 bags, the lowest level in 8.25 months.
Interestingly, there are indications of a slowdown in cocoa exports from the Ivory Coast, which remains the largest cocoa producer globally. According to data from the government, exporters shipped 516,787 tonnes of cocoa from October 1 to November 16, a 5.7% decrease compared to 548,494 tonnes during the same timeframe the previous year.
On the production side, Nigeria—which ranks fifth in global cocoa production—is also facing declines. The Cocoa Association of Nigeria forecasts that production for 2025/26 will fall to 305,000 tonnes, an 11% drop compared to an expected 344,000 tonnes for 2024/25. Interestingly, Nigeria’s cocoa exports remained unchanged year-on-year in September at 14,511 tonnes.
In May, the International Cocoa Organization (ICCO) revised the anticipated global cocoa deficit for 2023/24 to 494,000 tonnes, marking the largest shortfall in over 60 years. They also projected a 13.1% year-on-year reduction in production, estimating it at 4.380 million metric tonnes. The stock-to-crushed ratio is now at its lowest level in 46 years at 27.0%. However, ICCO expects a surplus of 142,000 tonnes in 2024/25, which would represent the first surplus in four years, with an anticipated 7.8% increase in production to 4.84 million metric tonnes.
