Key Takeaways
- Cocoa prices showed mixed performance, with New York futures seeing a slight increase and London futures experiencing a more significant gain, trading above recent low points.
- A prevailing bearish sentiment is driven by forecasts of abundant cocoa supplies and declining global demand, as indicated by reduced grinding activities in Asia and Europe.
- Factors providing some market support include a slowdown in cocoa exports from Ivory Coast and tighter cocoa inventories at U.S. ports.
- The International Cocoa Organization (ICCO) previously projected a substantial global deficit for the 2023/24 season but anticipated a surplus for 2024/25.
Market Movements and Sentiment
December ICE NY cocoa futures closed up by 11 points (0.29%) on Tuesday, while December ICE London cocoa #7 futures finished higher by 101 points (2.36%). These gains helped cocoa prices trade sideways, remaining above the significant lows established the previous week. New York cocoa futures had previously reached a 20-month low, and London cocoa futures a 20.5-month low. The market continues to face downward pressure, largely influenced by expectations of ample supply juxtaposed with subdued demand.
Potential for Short-Covering Rallies
An excessive short positioning by commodity funds in London cocoa futures could amplify any rally spurred by short-covering maneuvers. Data from the week ending October 14 revealed that funds significantly increased their net-short positions in London cocoa by 2,286 contracts, bringing the total to 13,057. This represented their largest short position in over three years. The release of positioning figures for NY cocoa has been delayed due to the U.S. government shutdown.
Global Demand Indicators
Persistent signs of weakening global cocoa demand continue to exert downward pressure on prices. Last Friday, the Cocoa Association of Asia reported a 17% year-over-year decrease in third-quarter Asian cocoa grindings, totaling 183,413 metric tons. This figure marked the lowest third-quarter grinding volume in nine years. Similarly, the European Cocoa Association announced on Thursday that third-quarter European cocoa grindings fell by 4.8% year-over-year to 337,353 metric tons, the lowest for that quarter in a decade. Conversely, the National Confectioners Association reported a 3.2% year-over-year increase in third-quarter North American cocoa grindings to 112,784 metric tons; however, this figure may have been influenced by the inclusion of new reporting companies.
Export Trends and Producer Support
A slowdown in cocoa exports from Ivory Coast, the world’s leading cocoa producer, has provided some support to prices. Government data released on Monday indicated that farmers in Ivory Coast shipped 133,209 metric tons of cocoa to ports during the initial period of the new marketing year, from October 1 to October 19. This represents a decrease of 31% compared to the 192,804 metric tons shipped during the same period last year.
In an effort to bolster farmer income and potentially influence sales volumes, the governments of Ivory Coast and Ghana have recently increased the prices paid to farmers for their cocoa beans. This initiative is expected to impact future supply dynamics.
Impact of Chocolate Demand and Crop Outlook
Over the past two months, cocoa prices have also been affected by concerns that elevated cocoa prices and tariffs could negatively impact chocolate consumption. Data from research firm Circana indicated that North American chocolate candy sales volume declined by more than 21% in the 13 weeks ending September 7, when compared to the same period in the prior year.
The outlook for an improved cocoa crop in Ivory Coast this year is also a bearish factor for prices. Chocolate manufacturer Mondelez recently commented that the current cocoa pod count in West Africa is 7% above the five-year average and materially higher than the previous year’s harvest. The main crop harvest in Ivory Coast has commenced, with farmers expressing optimism regarding the crop’s quality.
Supply Dynamics and Inventory Levels
Expectations of abundant global cocoa supplies continue to weigh heavily on cocoa prices. Deliveries in Ghana have surged, further pressuring 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 delivered during the same period in 2024. Ghana is the second-largest cocoa producer globally.
Tightening cocoa inventories offer a supportive element for prices. ICE-monitored cocoa inventories held in U.S. ports recently fell to a 6.25-month low of 1,870,004 bags as of last Friday.
📍 An additional supportive factor stems from the projected smaller cocoa production in Nigeria, the world’s fifth-largest cocoa producer. The Cocoa Association of Nigeria anticipates that the country’s 2025/26 cocoa production will decrease by 11% year-over-year to 305,000 metric tons, down from a projected 344,000 metric tons for the 2024/25 crop year. In related news, Nigeria reported a 15% year-over-year increase in August cocoa exports, reaching 17,239 metric tons.
International Cocoa Organization (ICCO) Forecasts
The International Cocoa Organization (ICCO) revised its forecast for the 2023/24 global cocoa deficit upwards to 494,000 metric tons in May, from a February estimate of 441,000 metric tons. This revised figure represents the largest deficit in over 60 years. ICCO reported a 13.1% year-over-year decline in 2023/24 cocoa production to 4.380 million metric tons. Furthermore, the global cocoa stocks-to-grindings ratio for 2023/24 dropped to a 46-year low of 27.0%.
⚡ Looking ahead to the 2024/25 season, ICCO projected a global cocoa surplus of 142,000 metric tons on February 28, 2024. This would mark the first surplus in four years. ICCO also forecasts a 7.8% year-over-year increase in 2024/25 global cocoa production, reaching 4.84 million metric tons.
Expert Summary
✅ Cocoa markets experienced mixed price action, influenced by conflicting supply and demand signals. While potential short-covering offered temporary support, overarching concerns about global demand weakness and ample supply projections continue to dominate market sentiment.