Key Takeaways
- Cocoa prices experienced a downturn, with both New York and London futures closing lower, retracting from recent three-week highs.
- Tightening supply concerns, driven by potential EU deforestation law impacts and reduced Ivory Coast exports, offered some price support.
- Conversely, weakening global demand, evidenced by significant drops in Q3 cocoa grindings across Asia and Europe, exerted bearish pressure.
- Despite a large global deficit in 2023/24, forecasts for a surplus in 2024/25 and improved crop prospects in some regions are weighing on prices.
Market Performance
December ICE NY cocoa futures (CCZ25) saw a dip of -20 points (-0.32%) on Friday, settling at a lower price. Similarly, December ICE London cocoa #7 futures (CAZ25) closed down -41 points (-0.90%).
Cocoa prices faced a downward trend on Friday. New York cocoa futures pulled back from a three-week high reached earlier in the week, while robusta futures also retreated from their Thursday three-week peak. Pre-weekend long liquidation contributed to the selling pressure.
Factors Influencing Cocoa Prices
Supply-Side Dynamics
Supply concerns provided some underlying support for cocoa prices following the European Union’s proposal to shorten the enforcement delay for its deforestation laws to six months, down from the previously discussed one year. These regulations mandate traceability for agricultural products, including cocoa, sourced from areas impacted by deforestation, potentially limiting supply availability for the EU market.
Inventory Levels
💡 Tighter cocoa inventories are a supportive factor for prices. This is evidenced by ICE-monitored cocoa inventories at U.S. ports, which fell to a seven-month low of 1,843,721 bags on Friday.
Export Slowdown from Ivory Coast
📍 Signs of a slowdown in cocoa exports from Ivory Coast, the world’s largest cocoa producer, are also contributing to price support. Government data indicated that shipments from Ivory Coast farmers to ports between October 1 and October 19 of the new marketing year totaled 133,209 MT, a decrease of 31% compared to the 192,804 MT recorded in the same period last year.
Demand-Side Pressures
Weak Global Demand Indicators
⚡ Weak global cocoa demand is acting as a bearish factor for prices. Last Friday, the Cocoa Association of Asia reported a 17% year-over-year decrease in third-quarter (Q3) Asian cocoa grindings, reaching 183,413 MT—the lowest Q3 figure in nine years.
Furthermore, the European Cocoa Association reported last Thursday that Q3 European cocoa grindings decreased by 4.8% year-over-year to 337,353 MT, marking the lowest third-quarter volume in a decade. While the National Confectioners Association reported a 3.2% year-over-year rise in Q3 North American cocoa grindings to 112,784 MT, this increase was reportedly influenced by the inclusion of new reporting companies, which may have skewed the data.
Impact of High Prices on Consumption
📊 Cocoa prices have been under pressure for the past two months due to concerns that elevated cocoa prices and tariffs could dampen chocolate demand. Data from research firm Circana indicated that North American sales volume for chocolate candy declined by over 21% in the 13 weeks ending September 7, compared to the same period last year.
Outlook and Production Forecasts
Improved Crop Prospects
⚡ An improved cocoa crop outlook in Ivory Coast this year is considered bearish for prices. Chocolate manufacturer Mondelez recently commented that the latest cocoa pod count in West Africa is 7% above the five-year average and materially higher than last year’s crop. The main crop harvest in Ivory Coast has commenced, with farmers expressing optimism regarding its quality.
Increased Deliveries in Ghana
📍 Cocoa deliveries in Ghana have surged significantly, exerting downward pressure on prices. Arrivals at Ghanaian ports in the four weeks ending September 4 reached 50,440 MT, a substantial increase from approximately 11,000 MT delivered in the same period in 2024. Ghana is the world’s second-largest cocoa producer.
Nigerian Production Estimates
📊 A supportive factor for cocoa markets is the projected lower cocoa production in Nigeria, the fifth-largest global producer. The Cocoa Association of Nigeria forecasts that Nigerian cocoa production for 2025/26 will decrease by 11% year-over-year to 305,000 MT, down from a projected 344,000 MT for the 2024/25 crop year. In related news, Nigeria reported a 15% year-over-year increase in August cocoa exports to 17,239 MT.
Global Cocoa Balance and Stocks
📌 On May 30, the International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit projection to -494,000 MT, representing the largest deficit in over six decades. The ICCO reported that 2023/24 cocoa production fell by 13.1% year-over-year to 4.380 million metric tons (MMT). Concurrently, the 2023/24 global cocoa stocks-to-grindings ratio declined to a 46-year low of 27.0%.
Looking ahead to 2024/25, the ICCO estimated a global cocoa surplus of 142,000 MT, which would mark the first surplus in four years. The organization also projected that global cocoa production in 2024/25 would increase by 7.8% year-over-year to 4.84 MMT.
Expert Summary
Cocoa futures experienced declines as the market navigated competing supply and demand signals. While tightening inventories and reduced exports from key producers offered some support, weakening global grindings and concerns over high prices impacting demand exerted considerable downward pressure.
The outlook remains mixed, with recent supply concerns contrasted by forecasts of a surplus in the upcoming season and improved crop conditions in some regions, suggesting continued volatility in the cocoa market.