Quick Summary
- Cocoa prices experienced a mixed performance, with New York cocoa rising due to short-covering and a slowdown in Ivory Coast exports, while London cocoa saw a slight decline.
- Data indicates a significant year-over-year drop in cocoa exports from Ivory Coast, the world’s largest producer.
- Conversely, global cocoa demand appears weak, with substantial declines reported in Asian and European cocoa grindings for Q3, though North American grindings saw a modest increase.
- Factors such as large speculative short positions, expectations of ample global supplies, and fears of dampened chocolate demand due to high prices are putting pressure on cocoa markets.
- Supportive factors include a potential decrease in Nigerian cocoa production and tightened cocoa inventories in US ports.
Market Performance and Export Data
December ICE NY cocoa futures saw a rise of +55 (+0.93%), while December ICE London cocoa #7 futures experienced a decrease of -7 (-0.17%). This mixed performance reflects shifting market dynamics. New York cocoa prices recovered from earlier lows, driven by short-covering activity and early indications of a slowdown in cocoa exports from Ivory Coast, the leading global cocoa producer.
💡 Government data revealed that Ivory Coast farmers shipped 133,209 metric tons of cocoa to ports between October 1 and October 19 of the current marketing year. This figure represents a notable -31% decrease compared to the 192,804 metric tons shipped during the same period last year.
Speculative Positions and Demand Indicators
An excessive short position held by commodity funds could amplify any rally fueled by short-covering. Weekly Commitment of Traders (COT) data from the week ending October 14 showed that funds increased their net-short positions in London cocoa by 2,286 contracts to a total of 13,057. This marks the largest short position observed in over three years. The release of figures for New York cocoa positioning has been delayed due to the US government shutdown.
⚡ Signs of weakening global cocoa demand are presenting a bearish outlook for prices. Last Friday, the Cocoa Association of Asia reported a -17% year-over-year decrease in Q3 Asian cocoa grindings, amounting to 183,413 tons. This represents the lowest Q3 grinding volume in nine years.
📊 Furthermore, the European Cocoa Association reported on the preceding Thursday that Q3 European cocoa grindings fell by -4.8% year-over-year to 337,353 metric tons, marking a ten-year low for the third quarter. In contrast, the National Confectioners Association noted a +3.2% year-over-year increase in Q3 North American cocoa grindings, totaling 112,784 metric tons. However, the positive impact of this North American data was potentially skewed by the inclusion of new reporting companies.
Price Pressures and Supply Outlook
Cocoa prices have been under considerable pressure, extending a two-month decline. New York cocoa futures recently hit a 20-month low, and London cocoa futures reached a 20.5-month low. The prevailing bearish sentiment is attributed to the outlook for abundant global supplies in conjunction with subdued demand.
✅ Support for increased supply comes from recent decisions by the governments of Ivory Coast and Ghana to increase the prices paid to farmers for their cocoa beans. This initiative is anticipated to stimulate sales and boost overall cocoa production.
📌 Concerns also linger regarding the impact of high cocoa prices and tariffs on chocolate consumption. Data from research firm Circana indicates that North American sales volume for chocolate candy declined by over -21% in the 13 weeks ending September 7, compared to the same period the previous year.
Crop Prospects and Production Data
The outlook for an improved cocoa crop in Ivory Coast this year further contributes to the bearish pressure on prices. Mondelez, a major chocolate manufacturer, recently reported that cocoa pod counts in West Africa are 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 about the crop’s quality.
⚡ Cocoa deliveries in Ghana have surged, adding weight to downward price pressure. In the four weeks ending September 4, cocoa arrivals at Ghanaian ports reached 50,440 metric tons, a significant increase compared to approximately 11,000 metric tons delivered during the same period in 2024. Ghana is recognized as the world’s second-largest cocoa producer.
📊 Another factor providing support for cocoa prices is a projected decrease in cocoa production in Nigeria, the fifth-largest cocoa producer globally. The Cocoa Association of Nigeria forecasts a -11% year-over-year decline in Nigeria’s 2025/26 cocoa production to 305,000 metric tons, down from a projected 344,000 metric tons for the 2024/25 crop year. Complementing this, Nigeria reported a +15% year-over-year increase in its August cocoa exports, totaling 17,239 metric tons.
Global Supply Deficit Revisions and Outlook
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 experienced in over 60 years. The ICCO noted that 2023/24 global cocoa production fell by 13.1% year-over-year to 4.380 million metric tons. Consequently, the 2023/24 global cocoa stocks-to-grindings ratio declined to a 46-year low of 27.0%.
📊 Looking ahead to the 2024/25 season, the ICCO forecasted a global cocoa surplus of 142,000 metric tons on February 28, 2024. This projection marks the first anticipated surplus in four years. The ICCO also projected that 2024/25 global cocoa production would increase by +7.8% year-over-year to 4.84 million metric tons.
Market Sentiment and Inventory Levels
📍 Tighter cocoa inventories are providing a supportive element for prices. ICE-monitored cocoa inventories held in US ports recently fell to a 6.25-month low of 1,870,004 bags as of last Friday.
Key Takeaways
The cocoa market is currently navigating a complex landscape of supply and demand indicators. While recent export data from Ivory Coast and weak grinding figures in Asia and Europe suggest demand challenges, factors such as increased farmer payments, a projected decline in Nigerian production, and tightened US port inventories offer some support.
📈 Market participants are closely watching the interplay between these bearish and bullish signals, with speculative positioning and forward-looking production estimates shaping price movements.