Cocoa Prices Experience Fluctuations Amid Supply Changes

On Monday, cocoa prices in the New York market rose by +5 (+0.09%), while London cocoa saw an increase of +63 (+1.55%). This rise follows last Friday’s gains, with New York cocoa reaching a three-and-a-half-week high. The recent increase can be attributed to expectations of a smaller-than-previously-anticipated global cocoa surplus. The International Cocoa Organization (ICCO) recently reduced its surplus forecast for 2024/25 from 142,000 tonnes to 49,000 tonnes and lowered its production estimate from 4.84 million metric tons (MMT) to 4.69 MMT.

Another contributing factor to rising cocoa prices is the decrease in ICE cocoa stocks. As of Monday, the stockpile at U.S. ports stood at 1,675,801 bags, marking an 8.75-month low.

Ivorian cocoa shipments have also decreased. From October 1 to December 7, Ivorian farmers sent 804,288 tonnes of cocoa to ports, a 1.8% decline compared to 819,425 tonnes during the same period last year. This decline is notable given that Ivory Coast is the largest cocoa producer globally.

However, the outlook isn’t entirely bullish. Forecasts for favorable weather are expected to enhance yields in West Africa, which may result in increased supply. Farmers in Ivory Coast have reported a beneficial mix of rain and sunshine, aiding the flowering of cocoa trees. Similarly, Ghanaian farmers noted that regular rains are helping the development of cocoa trees and pods, particularly ahead of the harmattan season.

The prospect of ample cocoa supplies is putting downward pressure on prices. Notably, on November 19, cocoa prices dropped to their lowest level in 1.75 years, largely due to expectations of a robust harvest in West Africa. Reports from Ivorian farmers indicate that the trees are thriving and recent dry weather has aided in drying the beans. Ghanaian farmers echoed this sentiment, saying that good weather has accelerated the growth of their cocoa beans.

Interestingly, chocolate manufacturer Mondelez recently stated that West Africa’s current cocoa crop is 7% above the five-year average and is significantly better than last year’s harvest. The main harvesting season in Ivory Coast has just started, and farmers are optimistic about the quality of the crop.

Additionally, cocoa prices face pressure from the European Parliament’s recent approval of a one-year extension of deforestation laws, which maintains abundant cocoa supplies. The EU regulation, known as EUDR, targets deforestation linked to imports of key commodities like cocoa from regions facing such issues.

Cocoa prices also fell on November 14 after the Trump administration announced the removal of a 10% reciprocal tariff on non-U.S. goods, including cocoa, alongside a 40% tariff on Brazilian food imports, when Brazil is a major cocoa producer.

The current market conditions reflect weaker global cocoa demand. Recently, the CEO of Hershey remarked that chocolate sales were disappointing during the Halloween season, a time that typically accounts for a significant portion of annual U.S. candy sales. Furthermore, the Asia Cocoa Association reported a 17% decline in Asia’s cacao crushing volume in the third quarter, reaching the lowest level in nine years. In Europe, cocoa crushing volumes also dropped by 4.8% year-on-year, indicating a challenging market.

On a related note, the National Confectionery Association highlighted a more than 21% decline in North American chocolate candy sales over a recent 13-week period compared to last year. Although North American cocoa milling volume increased slightly, this was mostly due to changes in reporting companies.

Another influencing factor for cocoa prices is the anticipated drop in production from Nigeria, the world’s fifth-largest cocoa producer. It’s projected that Nigeria’s cocoa output for the 2025/26 year will decrease by 11% from estimates for 2024/25.

The ICCO has previously stated that the global cocoa deficit for the 2023/24 year is anticipated to be -494,000 tonnes, marking the largest deficit in over six decades. Production is expected to decline by 12.9% from the previous year, leading to a historically low stock-to-crushed ratio.

In summary, while cocoa prices have gained lately due to reduced surplus forecasts and declining stocks, the overall market remains complex, affected by various factors influencing both supply and demand.