Cocoa Prices Plummet Amidst Mixed Harvest Reports
Today’s December ICE NY Cocoa (CCZ25) saw a decline of 254 points, or 4.16%, while December ICE London Cocoa #7 (CAZ25) dropped by 206 points, translating to a 4.73% fall. Cocoa prices took a hit today, with New York cocoa hitting a four-week low and London cocoa dropping to a three-week low.
This downturn follows a six-week peak reached last Tuesday, which had been buoyed by expectations of a strong cocoa harvest in West Africa. Cocoa farmers in Ivory Coast reported healthy growth in their cocoa trees, attributing it to recent dry weather that’s aided in the drying of the beans. Meanwhile, farmers in Ghana noted that favorable weather is helping their cocoa beans mature more quickly.
Adding to this optimism, Mondelez, a notable chocolate manufacturer, announced that the latest cocoa crop from West Africa exceeded the five-year average by 7%, being “significantly higher” than last year’s yields. The harvesting of the main crops in Ivory Coast has just commenced, and farmers appear hopeful regarding the quality of their produce.
However, the bearish sentiment surrounding prices can be attributed to weaker global demand for cocoa. On October 30, Hershey’s CEO expressed disappointment in this year’s chocolate sales during the Halloween period. Halloween typically represents nearly 18% of annual U.S. candy sales, second only to Christmas.
In addition, the Asia Cocoa Association stated on October 17 that cacao milling volume in Asia for the third quarter was 183,413 pieces, down 17% compared to last year, marking the lowest in nine years. The European Cocoa Association echoed this, reporting a 4.8% decrease in European cocoa crushing volumes for the third quarter, falling to 337,353 tonnes—the lowest for that period in a decade. However, in North America, cocoa milling volume did rise by 3.2% year-over-year, reaching 112,784 tons, although this result was partly due to the inclusion of new reporting companies. Recent data showed a steep decline in North American chocolate candy sales, down over 21% in the 13 weeks ending September 7, compared to last year.
Interestingly, signs of declining cocoa exports from Ivory Coast, the world’s leading cocoa supplier, may offer some support for prices. From October 1 to November 8, Ivorian farmers exported 411,979 tonnes of cocoa to ports—9% lower than the previous year, which had seen 454,624 tonnes during the same period.
On the speculative side, there’s an abundance of short positions in London Cocoa, potentially prompting short covering. The most recent Commitment of Traders (COT) report revealed that funds ramped up their net short position in London Cocoa by $3,746 to $19,194—a level not seen in over four years. As for NY Cocoa positions, we currently lack data due to the ongoing U.S. government shutdown.
On a brighter note, short covering was observed following an announcement on October 30 that cocoa will be included in the Bloomberg Commodity Index (BCOM) for the first time in 20 years, effective January. This news pushed cocoa prices to their six-week peak. The BCOM index has total assets of roughly $109 billion, meaning cocoa’s 1.7% weighting could lead to considerable investment inflows from passive funds. A report from Peak Trading Research LLC indicated that about $1.9 billion in cocoa futures might need to be acquired over the next 80 days.
Support for cocoa prices is further bolstered by dwindling ICE cocoa stocks. Last Thursday, the stockpile under ICE oversight at U.S. ports reduced to 1,793,757 bags, a low not seen in over seven months.
Complicating matters, Nigeria, the fifth-largest cocoa producer globally, expects a downturn in production, projecting 305,000 tonnes for 2025/26—an 11% decrease from the anticipated 344,000 tonnes for 2024/25. In September, Nigeria’s cocoa exports remained steady at 14,511 tonnes year-on-year.
In a broader context, the International Cocoa Organization (ICCO) recently adjusted its forecast for the global cocoa deficit in 2023/24 to -494,000 tonnes, marking the largest deficit in over six decades. They expect global cocoa production to drop by 13.1% from last year, settling at 4.380 million metric tons. The ICCO also revealed that the global cocoa stock-to-crushed ratio fell to 27.0%, the lowest in 46 years, with projections for a surplus of 142,000 tonnes in 2024/25, marking the first surplus in four years. Interestingly, ICCO anticipates a 7.8% increase in global cocoa production for 2024/25, expected to reach 4.84 million metric tons.
