At a Glance
- Cocoa futures saw a significant rally driven by the news of its inclusion in the Bloomberg Commodity Index for the first time in two decades, anticipated to attract substantial passive fund inflows.
- Shrinking cocoa inventories in U.S. ports to a seven-month low and a slowdown in exports from Ivory Coast are providing bullish support to prices.
- Despite some optimistic crop reports, global cocoa demand remains a concern, with disappointing Halloween sales and declining grindings in Asia and Europe.
- Ghana’s surge in cocoa arrivals is weighing on prices, while lower production projections in Nigeria offer some support.
- The market is navigating conflicting signals, including a record global cocoa deficit in 2023/24 and an estimated surplus for 2024/25, alongside fluctuating currency impacts.
Cocoa Market Reacts to Index Inclusion and Inventory Data
Cocoa futures experienced a notable upward movement on Friday. December ICE NY cocoa futures (CCZ25) closed higher by 93 points, marking a 1.54% increase, while December ICE London cocoa #7 futures (CAZ25) advanced by 84 points, a gain of 1.94%.
The primary catalyst for this sharp rally was the announcement that cocoa will be reintegrated into the Bloomberg Commodity Index (BCOM) starting in January, a significant development not seen in 20 years. With approximately $109 billion in assets tracking the BCOM index at the close of 2024, cocoa’s projected 1.7% weighting could stimulate substantial investment from passive funds. Industry analysis suggests that funds tracking the index may need to purchase around $1.9 billion in cocoa futures within the next 80 days.
⚡ Gains in the London cocoa market were further amplified as the British pound (GBPUSD) hit a 6.5-month low, making cocoa priced in sterling more attractive.
Supply and Demand Dynamics Influence Cocoa Prices
The tightening supply picture is also providing a foundation for support in cocoa prices. Data revealed that ICE-monitored cocoa inventories held at U.S. ports have fallen to their lowest point in seven months, reaching 1,815,627 bags as of Friday.
Reports from chocolate manufacturer Mondelez indicate that the latest cocoa pod count in West Africa is tracking 7% above the five-year average and is considerably higher than last year’s crop figures. The main crop harvest in Ivory Coast, the world’s largest cocoa producer, has commenced, with farmers expressing optimism regarding the quality of the yield.
📊 However, a slowdown in cocoa exports from Ivory Coast is putting upward pressure on prices. Government data released on Monday showed that during the new marketing year, from October 1 to October 26, Ivory Coast farmers shipped 215,219 metric tons of cocoa to ports. This figure represents a significant decrease of 24% compared to the 284,633 metric tons exported during the same period last year.
Prior to these recent gains, cocoa prices had been under considerable pressure for the preceding two months. The nearest futures contract earlier this month touched an 8.75-month low, driven by concerns that elevated cocoa prices and tariffs could erode chocolate consumption. Research firm Circana reported that North American chocolate candy sales volume declined by over 21% in the 13 weeks ending September 7, when compared to the same timeframe in the previous year.
Global Demand Concerns and Regional Production Variances
Weak global cocoa demand continues to exert bearish pressure on prices. The Chief Executive Officer of Hershey’s expressed disappointment with chocolate sales during the recent Halloween season. Halloween represents a substantial portion of annual U.S. candy sales, contributing nearly 18% in 2024, second only to Christmas.
Further evidence of demand weakness comes from Asia, where the Cocoa Association of Asia reported a 17% year-over-year decrease in third-quarter cocoa grindings, totaling 183,413 metric tons. This marks the lowest third-quarter grinding figure in nine years. In Europe, the European Cocoa Association noted a 4.8% year-over-year drop in third-quarter cocoa grindings, reaching 337,353 metric tons, also the lowest for a third quarter in a decade. While the National Confectioners Association reported a 3.2% rise in North American cocoa grindings for Q3 to 112,784 metric tons, this increase was reportedly influenced by the inclusion of new reporting companies.
📍 Conversely, a surge in cocoa deliveries in Ghana, the world’s second-largest cocoa producer, is weighing on prices. In the four weeks ending September 4, cocoa arrivals at Ghanaian ports reached 50,440 metric tons, a significant increase from approximately 11,000 metric tons reported in the same period of 2024.
On a supportive note, Nigeria, the fifth-largest cocoa producer globally, is anticipating lower production. The Cocoa Association of Nigeria projects that the country’s 2025/26 cocoa production will fall by 11% year-over-year to 305,000 metric tons, down from an estimated 344,000 metric tons for the 2024/25 crop year. In related news, Nigeria reported a 15% year-over-year increase in cocoa exports for August, totaling 17,239 metric tons.
International Cocoa Organization (ICCO) Forecasts
The International Cocoa Organization (ICCO) revised its forecast for the 2023/24 global cocoa deficit to -494,000 metric tons on May 30, the largest deficit recorded in over six decades. The ICCO reported that 2023/24 cocoa production decreased by 13.1% year-over-year to 4.380 million metric tons. Global cocoa stocks-to-grindings ratio for 2023/24 declined to a 46-year low of 27.0%.
For the 2024/25 season, the ICCO estimates a global cocoa surplus of 142,000 metric tons, which would mark the first surplus in four years. Furthermore, the ICCO projects a 7.8% year-over-year increase in global cocoa production for 2024/25, reaching 4.84 million metric tons.
Expert Summary
The cocoa market is demonstrating resilience, fueled by its anticipated inclusion in the Bloomberg Commodity Index and tightening global inventories. While recent export data from Ivory Coast suggests supply constraints, ongoing concerns about global demand and varying regional crop expectations continue to shape market sentiment.