Cocoa Prices Surge Amid Supply Concerns
Cocoa prices experienced a notable rise on Monday, with ICE NY Cocoa closing at +206 (+3.51%) and March ICE London Cocoa #7 ending at +109 (+2.57%).
This uptick can largely be attributed to dwindling cocoa supplies from Ivory Coast, the world’s leading cocoa producer. Recent statistics indicate that farmers from Ivory Coast have shipped approximately 1.073 million metric tons (MMT) of cocoa to ports since the current marketing year began, reflecting a 3.3% decline from 1.11 MMT during the same timeframe last year.
Market expectations of index-related purchases have also played a role in this price surge. Starting this month, cocoa futures were added to the Bloomberg Commodity Index (BCOM), a change that could potentially trigger up to $2 billion in buying for New York cocoa futures, as suggested by analysts at Citigroup.
Interestingly, last Friday saw cocoa prices dip to a one-week low due to reports of favorable growing conditions in West Africa. The Tropical General Investment Group noted that cocoa harvests in both Ivory Coast and Ghana are projected to rise in February and March because of these optimal conditions, with farmers observing larger and healthier pods this year compared to the last.
In light of these conditions, Mondelez, a major chocolate manufacturer, recently shared that West Africa’s latest cocoa crop surpassed the five-year average by 7%, significantly outperforming last year’s yield. As the main crop harvesting gets underway in Ivory Coast, farmers are expressing optimism about the quality of their cocoa.
Supporting this uptrend, there’s been a noticeable decline in ice-monitored cocoa stocks in U.S. ports, which recently hit a 9.5-month low at 1,626,105 bags on December 26.
However, the global supply outlook remains tight. The International Cocoa Organization (ICCO) has reduced its forecast for the global cocoa surplus in 2024/25 to 49,000 tonnes, a significant drop from the earlier prediction of 142,000 tonnes. Additionally, the anticipated global cocoa production for 2024/25 has been adjusted downward from 4.84 MMT to 4.69 MMT. Rabobank has also revised its global cocoa surplus forecast for 2025/26 from 328,000 tonnes to 250,000 tonnes.
In a related development, the European Parliament recently approved a one-year extension of deforestation regulations, which has temporarily lowered cocoa prices while ensuring ample supplies. This legislation, known as EUDR, targets deforestation issues in countries exporting key commodities to the EU, including cocoa. Its postponement allows for continued agricultural imports from deforested regions in Africa, Indonesia, and South America.
Nevertheless, weak global cocoa demand casts a shadow over these developments. The Asia Cocoa Association noted on October 17 that cocoa milling in Asia during the third quarter fell by 17% compared to the previous year, marking the lowest volume in nine years. Similarly, European cocoa crushing volumes also experienced a 4.8% decline, reaching a decade-low level in the same time frame. Meanwhile, there was a slight increase in North American cocoa milling, which rose by 3.2% year-on-year, although this figure may have been influenced by new reporting entities.
On another note, cocoa production in Nigeria, the fifth-largest cocoa producer globally, is expected to fall in the coming years. The Cocoa Association of Nigeria estimates a decline to 305,000 tonnes for the 2025/26 season, down 11% from 344,000 tonnes projected for 2024/25. Interestingly, Nigeria reported flat cocoa exports of 14,511 tonnes in September compared to the previous year.
Looking ahead, the International Cocoa Organization (ICCO) has predicted a global cocoa deficit of 494,000 tonnes for the 2023/24 season, the largest shortage observed in over 60 years, driven by a 12.9% decrease in production to 4.368 MMT. However, ICCO anticipates a rebound, forecasting a surplus of 49,000 tonnes in 2024/25, with production expected to rise by 7.4% to 4.69 MMT.
