Cocoa Market: Key Takeaways from Recent Trends
- Cocoa futures are experiencing mixed trading, with New York cocoa showing recovery despite London cocoa declining.
- Ivory Coast cocoa arrivals are slightly down year-over-year, indicating potential supply shifts from the world’s largest producer.
- Expectations of a strong West African main crop are influencing cocoa prices, with favorable weather conditions boosting yields.
- Global cocoa demand remains weak, evidenced by disappointing chocolate sales and reduced grindings in key regions like Asia and Europe.
- Shrinking ICE cocoa inventories in US ports are providing some support for cocoa prices amidst overall bearish sentiment.
- The International Cocoa Organization (ICCO) projects a significant global cocoa deficit for 2023/24, followed by an anticipated surplus in 2024/25.
Cocoa futures are exhibiting mixed trends, rebounding from recent 1.75-year lows. New York cocoa has seen an uptick, spurred by short covering and indications of slightly lower cocoa arrivals at Ivory Coast ports. In contrast, London cocoa futures have experienced a decline, reflecting divergent market pressures.
Government data from the Ivory Coast, the world’s leading cocoa producer, reveals that port arrivals for the new marketing year (October 1 to November 23) totaled 618,899 metric tons (MT). This figure represents a slight decrease of 3.7% compared to the 642,500 MT recorded during the same period last year.
The recent volatility in cocoa prices can be attributed to several factors. A significant sell-off occurred over the past two weeks, largely driven by news last Wednesday that European Union nations proposed a one-year delay in implementing the EU Deforestation Regulation (EUDR). This regulation aims to combat deforestation linked to commodities like cocoa imported into the EU.
đź“Ť What is the EUDR’s purpose and why is its delay impacting cocoa prices? The EUDR is designed to ensure that products consumed in the EU do not contribute to global deforestation. Its proposed delay has eased immediate supply concerns, allowing EU countries more time to import agricultural products from regions where deforestation might be occurring, thus influencing market prices.
The delay of the EUDR, initially expected by late December, alleviates immediate supply anxieties. This extension provides a buffer, enabling EU member states to continue importing agricultural products, including cocoa, from regions in Africa, Indonesia, and South America without immediate stringent deforestation compliance requirements.
Compounding the pressure on cocoa prices are widespread expectations of a bumper harvest in West Africa. Reports from cocoa farmers in the Ivory Coast indicate healthy cocoa trees and favorable dry weather that has aided bean drying. Similarly, Ghanaian cocoa farmers report ideal weather conditions, leading to rapid development of cocoa pods.
Global Cocoa Supply & Demand Dynamics
Mondelez, a prominent chocolate manufacturer, recently highlighted that the latest cocoa pod count in West Africa is an encouraging 7% above the five-year average. This figure is also materially higher than the previous year’s crop, signaling a robust harvest. With the main crop harvest just commencing in the Ivory Coast, farmers are expressing optimism regarding the quality of their yield.
Further contributing to the downward pressure on cocoa prices was the Trump administration’s announcement on November 14 to eliminate the 10% reciprocal tariffs on commodities not grown in the US, including cocoa. This policy shift is expected to ease some import costs for cocoa.
Weak global demand for cocoa is also a significant bearish factor. The CEO of Hershey, a major chocolate producer, stated on October 30 that Halloween chocolate sales were disappointing. Halloween typically accounts for a substantial portion of annual US candy sales, second only to Christmas.
📊 How do regional grinding statistics reflect cocoa demand? The Cocoa Association of Asia reported a 17% year-over-year decline in Q3 Asia cocoa grindings, reaching 183,413 MT—the lowest for a third quarter in nine years. The European Cocoa Association also noted a 4.8% year-over-year drop in Q3 European cocoa grindings to 337,353 MT, marking a ten-year low for the third quarter. These numbers indicate a clear contraction in demand in key consumption regions for cocoa.
While the National Confectioners Association reported a 3.2% year-over-year increase in Q3 North American cocoa grindings to 112,784 MT, this data may be skewed by the inclusion of new reporting companies. Separately, research firm Circana revealed that North American sales volume of chocolate candy fell by over 21% in the 13 weeks ending September 7, compared to the same period last year.
Inventory Levels and Future Projections for Cocoa
Amidst these bearish pressures, shrinking ICE cocoa inventories are offering some support to prices. ICE-monitored cocoa inventories held in US ports decreased to an 8.25-month low of 1,733,345 bags last Friday, suggesting tighter immediate supply available in storage.
Another supportive factor for cocoa prices is the projected decline in cocoa production from Nigeria, the world’s fifth-largest cocoa producer. Nigeria’s Cocoa Association forecasts an 11% year-over-year decrease in the country’s 2025/26 cocoa production, potentially falling to 305,000 MT from an estimated 344,000 MT for the 2024/25 crop year. Intriguingly, Nigeria’s September cocoa exports remained unchanged year-over-year at 14,511 MT.
The International Cocoa Organization (ICCO) significantly revised its 2023/24 global cocoa deficit estimate on May 30, projecting a massive shortfall of -494,000 MT. This represents the largest deficit recorded in over six decades. The ICCO attributed this dramatic deficit to a 13.1% year-over-year reduction in 2023/24 cocoa production, which fell to 4.380 MMT.
✅ What does a global cocoa deficit mean for the market? A deficit indicates that demand outstrips supply, typically leading to increased prices as reserves are drawn down. The ICCO’s projection of a significant deficit highlights current supply-side challenges, while their forecast for a surplus in 2024/25 points to a potential market correction.
Furthermore, the ICCO stated that the global cocoa stocks-to-grindings ratio for 2023/24 declined to a 46-year low of 27.0%. However, looking ahead, the ICCO has estimated a global cocoa surplus of 142,000 MT for 2024/25, signaling the first projected surplus in four years. This forecast is based on an anticipated 7.8% year-over-year increase in global cocoa production for 2024/25, reaching 4.84 MMT.
Frequently Asked Questions about Cocoa Market Trends
What is causing the current fluctuations in cocoa prices?
Current cocoa price fluctuations stem from a blend of factors. Short-term recoveries in NY cocoa are driven by short covering and lower Ivory Coast port arrivals, while London cocoa sees declines due to broader market pressures. The proposed delay of the EU Deforestation Regulation and expectations of a strong West African crop are also major influences.
How does the West African cocoa harvest impact global prices?
As West Africa is the primary source of global cocoa, a robust harvest there typically puts downward pressure on prices due to increased supply. Favorable weather conditions and high pod counts, as reported by farmers and major chocolate makers, are currently contributing to expectations of a bumper crop, which tends to depress cocoa futures.
Why is global cocoa demand considered weak?
Global cocoa demand is currently weak due to several indicators. Disappointing chocolate sales during key periods like Halloween, coupled with significant year-over-year declines in cocoa grindings in major regions like Asia and Europe, signal reduced consumption and industrial demand for cocoa.
What role do cocoa inventories play in price support?
Cocoa inventories refer to stored supplies. When these inventories, such as ICE-monitored cocoa in US ports, shrink to multi-month lows, it indicates a tightening of available physical supply. This scarcity can provide support to cocoa prices, counteracting bearish factors by suggesting that current demand is drawing down existing reserves.
What are the ICCO’s projections for future cocoa deficits and surpluses?
The International Cocoa Organization (ICCO) projected a substantial global cocoa deficit of -494,000 MT for 2023/24, the largest in over 60 years, driven by a significant drop in production. However, for 2024/25, the ICCO anticipates a global cocoa surplus of 142,000 MT, marking the first projected surplus in four years, based on an expected increase in global production.
What’s Next for Cocoa Prices?
The cocoa market remains a complex interplay of supply expectations, demand realities, and regulatory shifts. While the prospect of a bumper West African crop and weak global demand suggest continued downward pressure, shrinking inventories and specific regional production deficits, like those in Nigeria, could offer some counterbalancing support.
Looking ahead, market participants will closely monitor the actual yields from the West African main crop and any further developments regarding the EU Deforestation Regulation. The ICCO’s shift from a significant deficit to a projected surplus highlights the rapidly evolving nature of the cocoa market, emphasizing the need for continuous monitoring of these influential factors.
