Cocoa Prices Decline Amid Mixed Signals
On Friday, cocoa prices witnessed a notable drop, with December ICE NY Cocoa (CCZ25) closing down by 200 points, or 3.64%. Similarly, December ICE London Cocoa #7 (CAZ25) fell by 37 points, equating to a 0.90% decline.
This week’s downturn pushed cocoa prices to a 1.75-year low. The pressure seems to stem from expectations surrounding potential tariff cuts. U.S. Treasury Secretary George Bessent indicated earlier this week that there will be significant announcements shortly regarding tariffs on non-U.S. crops, including cocoa.
Interestingly, cocoa prices were on the rise just last Tuesday, reaching a six-week high, buoyed by optimistic reports of a good cocoa harvest in West Africa. Farmers in Ivory Coast reported that their cacao trees are thriving, aided by recent dry conditions, while in Ghana, farmers noted that favorable weather was helping beans mature more quickly.
In a related development, Mondelez, a major chocolate manufacturer, shared that this year’s harvest in West Africa is 7% higher than the five-year average and considerably better than last year’s yield. The harvesting of main cocoa crops in Ivory Coast has just commenced, and farmers are optimistic about the quality.
However, the overall sentiment remains bearish, driven by weak global demand for cocoa. The CEO of Hershey recently described Halloween sales as “disappointing,” despite that season being a crucial time for candy sales in the U.S. Additionally, reports from the Asia Cocoa Association indicated that cacao crushing in Asia fell by 17% year-on-year in the third quarter, marking the lowest level for that quarter in nearly a decade. Meanwhile, the European Cocoa Association noted a 4.8% decrease in European cocoa crushing volumes during the same period, also reaching a ten-year low. Although North America did see a slight increase of 3.2% in cocoa milling volume, this was somewhat skewed by the inclusion of new reporting entities. Adding to the concern, chocolate sales in North America dropped over 21% in the weeks leading up to September 7 compared to last year, according to Circana’s research data.
On the export front, signs of a slowdown from Ivory Coast, the largest cocoa producer globally, may support price stabilization. Data revealed that Ivorian farmers dispatched 411,979 tonnes of cocoa from October 1 to November 8, reflecting a 9% decrease from the same timeframe last year.
Interestingly, the market saw a brief surge last Tuesday when news broke of cocoa being included in the Bloomberg Commodity Index starting in January, the first time in two decades. This inclusion could prompt significant inflows into the cocoa market, as the index manages approximately $109 billion in assets, with cocoa expected to attract around $1.9 billion in futures purchases over the next couple of months.
Moreover, decreasing cocoa stocks monitored by ICE are offering some support for prices. As of Friday, the cocoa stockpile at U.S. ports stood at 1,766,644 bags, the lowest in 7.75 months.
Another factor influencing cocoa prices is the anticipated drop in cocoa production in Nigeria, the fifth largest producer. The Cocoa Association of Nigeria projects a production decline to 305,000 tonnes for the 2025/26 season compared to an estimated 344,000 tonnes in 2024/25. The latest data indicates that Nigeria’s cocoa exports for September remained flat year-on-year at 14,511 tonnes.
Lastly, the International Cocoa Organization recently revised its forecast for a global cocoa deficit for 2023/24 to -494,000 tonnes, the highest deficit in over 60 years. They noted a production decrease of 13.1% to 4.380 million metric tons for the year. ICCO also stated that the global cocoa stock-to-crushed ratio has dipped to 27.0%, a record low for 46 years, but they anticipate a return to surplus in 2024/25 with an estimated production increase of 7.8% year-on-year.
