Cocoa Market Sees Price Dip as Demand Eases and Supply Outlook Strengthens
Main Highlights
- Cocoa futures experienced a significant downturn, with both New York and London contracts closing lower after reaching weekly highs.
- Key global cocoa grinding reports indicate weakening demand, especially in Asia, though North American figures showed a marginal increase.
- Anticipated robust global supplies, driven by increased farmer payments and positive crop outlooks, are exerting downward pressure on prices.
- Concerns over chocolate demand, influenced by high prices and tariffs, are also contributing to shifts in the cocoa market.
Cocoa prices retreated sharply from recent one-week highs on Friday, with December ICE NY cocoa futures (CCZ25) closing down 1.60% and December ICE London cocoa futures #7 (CAZ25) settling down 2.19%. This price movement suggests a significant shift in market sentiment driven by new data releases.
Shifting Demand Dynamics Affecting Global Cocoa Markets
Weakening Demand in Key Regions
Indication of weakening global cocoa demand has led to a broader decline in cocoa prices. The Cocoa Association of Asia reported a substantial 17% year-over-year decrease in Q3 Asian cocoa grindings, totaling 183,413 metric tons. This figure represents the lowest Q3 posting in nine years. In line with this trend, the European Cocoa Association reported a 4.8% year-over-year drop in Q3 European cocoa grindings, reaching 337,353 MT, a decade low for the third quarter. Conversely, the National Confectioners Association noted a 3.2% year-over-year increase in Q3 North American cocoa grindings to 112,784 MT. However, the positive implications of the North American data may be tempered by the inclusion of new reporting companies, potentially skewing the figures.
📊 Understanding regional demand trends is crucial for forecasting broader market movements.
Supply Outlook and Influencing Factors
Anticipated Increase in Global Cocoa Supplies
Governments in Ivory Coast and Ghana have implemented higher payments to cocoa farmers, an initiative expected to stimulate both sales and overall cocoa supply. This increased farmer support is a key factor in the expectation of enlarged production volumes.
✅ Increased farmer support can often lead to enlarged production volumes.
Impact of High Prices on Chocolate Consumption
For the past two months, cocoa prices have been under pressure due to 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 decreased by over 21% in the 13 weeks ending September 7, compared to the same period last year.
📍 High consumer prices can directly impact demand for derived products like chocolate.
Prospects for Improved Harvests and Supply Dynamics
Favorable Crop Outlooks in Producing Nations
The prospect of an improved cocoa crop in Ivory Coast this year contributes to the bearish sentiment for prices. Mondelez, a chocolate manufacturer, reported that the latest cocoa pod count in West Africa is 7% above the five-year average and significantly higher than last year’s crop. The main crop harvest in Ivory Coast has commenced, with farmers expressing optimism about crop quality.
⚡ A stronger harvest outlook typically translates to lower prices, assuming consistent demand.
Expectations of abundant global cocoa supplies are significantly impacting cocoa prices. Cocoa deliveries in Ghana have surged, contributing to downward price pressure. In the four weeks ending September 4, cocoa arrivals at Ghanaian ports reached 50,440 MT, a substantial increase compared to approximately 11,000 MT during the same period in 2024. Ghana holds the position of the world’s second-largest cocoa producer.
📊 Observing import/export figures can provide early signals of supply-side shifts.
Inventory Levels and Speculative Positioning
Conversely, tighter cocoa inventories offer some support for prices. ICE-monitored cocoa inventories held in U.S. ports recently fell to a 6.25-month low of 1,870,004 bags on Friday.
An excessive short position held by commodity funds could potentially intensify any short-covering rally. Funds increased their net-short holdings in London cocoa by 2,286 to 13,057 in the week ending October 14, representing the largest short position in over three years, according to Commitment of Traders (COT) data. The U.S. government shutdown had delayed the release of positioning figures for NY cocoa.
💡 Speculative positioning by large funds can introduce volatility and amplify price movements.
Export Pace and Crop Quality Concerns
Cocoa also finds some support in a slowdown in export pace from Ivory Coast, the world’s leading cocoa producer. Government data released Monday showed that Ivory Coast farmers shipped 48,753 MT of cocoa to ports during the current marketing year from October 1-11, a decrease from 100,264 MT in the same period a year ago.
Quality concerns regarding the Ivory Coast’s mid-crop cocoa are also providing price support. Rabobank attributes the lower quality of the mid-crop partly to late rains in the region, which restricted crop development. The mid-crop, which is the smaller of the two annual harvests and typically runs from April to September, has an average estimated yield of 400,000 MT for this year, a 9% decrease from last year’s 440,000 MT.
📌 Understanding crop quality issues is vital for assessing the true supply picture.
Production Forecasts in Nigeria
An additional supportive factor for cocoa is the projected smaller production in Nigeria, the world’s fifth-largest cocoa producer. The Cocoa Association of Nigeria forecasts an 11% year-over-year decline in Nigerian cocoa production for 2025/26, down to 305,000 MT from a projected 344,000 MT for the 2024/25 crop year. In related trade news, Nigeria reported a 15% year-over-year increase in its August cocoa exports, reaching 17,239 MT.
International Cocoa Organization (ICCO) Projections
Shift from Deficit to Projected Surplus
On May 30, the International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit estimate to 494,000 MT, up from a February projection of 441,000 MT, marking the largest deficit in over six decades. The ICCO stated that 2023/24 cocoa production fell by 13.1% year-over-year to 4.380 million metric tons (MMT). Furthermore, the ICCO reported that 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 MT as of February 28, 2024, which would be the first 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 MMT.
✅ The shift from a deficit to a projected surplus significantly impacts long-term price outlooks.
Fundfa Insight
The cocoa market is experiencing significant volatility driven by conflicting signals between declining demand in key consuming regions and expectations of increased global supply. While recent reports highlight weakening grindings in Asia and Europe, potential farmer incentives and favorable crop forecasts in major producing nations suggest a future balance shift towards surplus, pressuring prices downwards.