Cocoa Market Update

On Wednesday, cocoa prices took a hit, with December ICE NY Cocoa closing down 204 points, or about 3.09%, while December ICE London Cocoa dropped 189 points, marking a 3.97% decline.

The downturn in prices seems to be linked to optimistic expectations for a robust cocoa harvest in West Africa. Farmers in Ivory Coast are reporting healthy growth in their cocoa trees, aided by recent dry weather that helps with the drying process. In Ghana, similar good weather is enabling quicker development of cocoa beans.

Adding to this confidence, Mondelez, a major player in the chocolate industry, recently noted that West Africa’s latest cocoa crop is 7% higher than the five-year average and “significantly” better than last year’s yield. Harvesting in Ivory Coast has just started, and farmers appear hopeful about the quality this season.

Just the day before, cocoa prices had reached a five-week high, buoyed by news that cocoa will be included in the Bloomberg Commodity Index for the first time in two decades starting in January. Given that the index tracks about $109 billion in total assets, cocoa’s 1.7% allocation could lead to substantial investments from passive funds. Peak Trading Research LLC estimated that this would mean a need to acquire around $1.9 billion in cocoa futures over the next couple of months.

Another factor supporting prices is a decrease in cocoa exports from Ivory Coast, the largest cocoa producer globally. According to government data, the country shipped about 304,840 tonnes of cocoa to ports between October 1 and November 2, which is a 16% decline from 365,072 tonnes during the same timeframe the previous year.

Moreover, falling cocoa stocks under ICE surveillance are bolstering prices. As of Tuesday, the stockpile at U.S. ports was reported at 1,810,657 bags, the lowest level in 7.25 months.

However, there are concerns as cocoa prices are also being pressured by increasing costs and fears that tariffs might hinder chocolate demand. Recent data from Circana indicates that chocolate candy sales in North America dropped over 21% in the 13 weeks ending September 7 compared to the previous year.

The global demand for cocoa seems weak as well. The CEO of Hershey stated that chocolate sales for this year’s Halloween season were “disappointing.” It’s worth noting that Halloween represents nearly 18% of annual candy sales in the U.S., just behind Christmas. On another note, the Asia Cocoa Association mentioned that cacao milling in Asia amounted to 183,413 pieces in Q3, marking a 17% year-on-year decline, the lowest in nine years. European cocoa crushing also fell by 4.8% compared to the same quarter the previous year, according to the European Cocoa Association.

Interestingly, there is support for cocoa prices from diminishing production in Nigeria, the fifth-largest cocoa producer. The Cocoa Association of Nigeria forecasts a production drop to 305,000 tonnes in the 2025/26 crop year, an 11% decline compared to the 2024/25 projections. In September, Nigeria reported cocoa exports totaling 14,511 tonnes, which remained unchanged year-on-year.

In more sobering news, the International Cocoa Organization recently adjusted the global cocoa deficit for 2023/24 to 494,000 tonnes, the largest shortfall in over six decades. They noted that cocoa production is expected to be 4.380 million metric tons, reflecting a 13.1% decrease from the prior year. Furthermore, the organization highlighted that the global cocoa stock-to-crushed ratio has fallen to 27.0%, the lowest in 46 years. Interestingly, they anticipate a cocoa surplus of 142,000 tonnes in 2024/25, which would mark the first surplus in four years.