Cocoa Prices Experience Notable Rebound
On Friday, cocoa futures saw a significant rise, with March ICE NY Cocoa closing up by 411 points, or 8.07%. Similarly, December ICE London Cocoa rose by 164 points, marking a 4.34% increase.
The price jump can be attributed to the International Cocoa Organization’s recent forecast adjustments, lowering the anticipated global cocoa surplus for 2024/25 from 142,000 tonnes to 49,000 tonnes. They also revised the global production estimate down to 4.69 million metric tons from 4.84 million metric tons.
Additionally, a decline in the dollar index to a 1.5-week low sparked some short covering in cocoa futures. The decreasing cocoa stocks under ICE surveillance further supported prices, with the inventory at U.S. ports dropping to 1,709,185 bags, the lowest level in over eight months.
Another influential factor is that London cocoa funds have been holding excessive short positions. The latest Commitment of Traders report indicated an increase in net short positions, climbing to 22,748, the highest amount seen in over four years.
On the other hand, widespread expectations of abundant global cocoa supplies have been weighing on market prices. In fact, cocoa prices recently fell to a 1.75-year low, fueled by optimistic reports about crop conditions in West Africa. Farmers in Ivory Coast noted healthy cocoa tree growth, thanks to recent dry weather, while farmers in Ghana reported faster bean development due to good climatic conditions.
Chocolate producer Mondelez has revealed that the current West African cocoa crop is 7% higher than the five-year average, which is quite encouraging compared to last year’s numbers. With the main harvest in Ivory Coast just underway, farmers are optimistic about the quality of their cocoa.
Adding to the mix, the European Parliament recently extended deforestation laws for a year, which keeps cocoa supplies abundant and pressures prices further. The aim of this EUDR regulation is to address deforestation linked to commodities such as cocoa and soy imported into the EU. The delay allows EU countries to keep trading agricultural products from regions where deforestation is an ongoing issue.
Moreover, price declines were influenced by the Trump administration’s decision last November to eliminate a 10% reciprocal tariff on cocoa and a 40% tariff on food imports from Brazil, which is among the top cocoa producers globally.
There’s also a decrease in cocoa arriving at Ivorian ports, with shipments reaching 618,899 tonnes from October to November, down by 3.7% compared to the same period last year.
Yet, it’s worth noting that global cocoa demand is currently weak. Recently, the CEO of Hershey remarked that chocolate sales over Halloween were disappointing, as this holiday usually constitutes a significant portion of yearly candy sales in the U.S. Meanwhile, reports show a notable decline in cacao crushing volumes in both Asia and Europe, indicating a drop in demand. In North America, although cocoa milling saw a slight increase, overall chocolate sales have noticeably fallen by over 21% in recent weeks compared to a year ago.
On a related note, Nigeria, the fifth largest cocoa producer, is experiencing a downturn in production. Projections suggest a decline in output for 2025/26, further tightening the market, although exports from Nigeria remained steady year-on-year in September.
Interestingly, the ICCO has recently reported historical figures regarding cocoa deficits and production levels, with the current 2023/24 shortfall being the largest in more than six decades. They anticipate a surplus for 2024/25, marking a shift in the market as global production is forecasted to rise by 7.4% year-on-year.
