Quick Summary
- Cocoa prices saw a significant rally, with New York and London futures reaching multi-week highs.
- Supply concerns, driven by potential EU deforestation law impacts and falling inventories, are major price drivers.
- Tighter cocoa supplies are also evidenced by reduced export volumes from Ivory Coast.
- Despite supply issues, signs of weakening global demand from Asia and Europe present a bearish outlook.
- Improved crop forecasts in Ivory Coast and increased deliveries in Ghana are also weighing on prices.
Cocoa Market Surges on Supply Worries
December ICE NY cocoa futures (CCZ25) closed up +382, or 6.46%, on Wednesday. Simultaneously, December ICE London cocoa #7 futures (CAZ25) finished the trading day higher by +366, or 8.71%. This surge led to New York cocoa reaching a two-week high and London cocoa hitting a two-and-a-half-week peak.
Regulatory Impacts on Cocoa Supply
Regulatory developments are significantly influencing cocoa prices. The European Union’s proposed six-month delay for enforcing its deforestation laws, rather than the initially planned one-year extension, has fueled supply concerns. These upcoming regulations mandate traceability for agricultural products, including cocoa, sourced from areas affected by deforestation. Non-compliance could restrict market access to the EU, potentially tightening global cocoa supplies.
Tightening Inventories Bolster Prices
💡 ICE-monitored cocoa inventories held at U.S. ports have fallen to an 6.5-month low, further supporting upward price movements. On Wednesday, these inventories stood at 1,854,690 bags, indicating a constrained physical market.
London Cocoa Futures Show Speculative Activity
📊 Commodity funds have established a substantial net-short position in London cocoa futures, creating potential for a short-covering rally. As of the week ending October 14, these funds increased their net-short positions by 2,286 to a total of 13,057, representing the largest short position in over three years, according to the latest Commitment of Traders (COT) data. The release of similar positioning data for New York cocoa futures has been delayed due to the U.S. government shutdown.
Ivory Coast Exports Slowing
⬇️ Signs of a slowdown in cocoa exports from Ivory Coast, the world’s largest producer, are also contributing to price support. Government data revealed that from October 1 to October 19 of the new marketing year, Ivory Coast farmers shipped 133,209 metric tons of cocoa to ports. This figure is a notable decrease of 31% compared to the 192,804 metric tons exported during the same period last year.
Global Demand Shows Signs of Weakness
Asian Cocoa Grindings Decline
📉 The Cocoa Association of Asia reported a significant 17% year-over-year drop in third-quarter cocoa grindings, reaching 183,413 metric tons. This marks the lowest third-quarter grinding volume in nine years, signaling a considerable dip in regional demand.
European Cocoa Grindings Fall
📉 Complementing the Asian trend, the European Cocoa Association announced a 4.8% year-over-year decrease in third-quarter European cocoa grindings, totaling 337,353 metric tons. This represents the lowest third-quarter figure in a decade.
North American Grindings Show Mixed Results
📊 In contrast, North American cocoa grindings reported by the National Confectioners Association saw a slight increase of 3.2% year-over-year to 112,784 metric tons. However, this rise is attributed partly to the inclusion of new reporting companies, which may skew the year-over-year comparison.
Broader Market Pressures on Cocoa
🍫 Cocoa prices have faced pressure over the past two months, largely due to concerns that elevated cocoa prices and tariffs could dampen consumer demand for chocolate products. 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 in the previous year.
Factors Influencing Future Cocoa Supply and Demand
West African Crop Outlook
📈 Chocolate manufacturer Mondelez has reported that the latest cocoa pod count in West Africa is 7% above the five-year average and materially higher than last year’s crop. With the main harvest in Ivory Coast having commenced and farmers expressing optimism about crop quality, this improved outlook for West African production could exert downward pressure on prices.
Ghanaian Cocoa Deliveries Surge
⬆️ Cocoa arrivals at Ghanaian ports have surged significantly, weighing on prices. In the four weeks ending September 4, Ghana, the world’s second-largest cocoa producer, saw approximately 50,440 metric tons delivered to ports, a substantial increase from around 11,000 metric tons during the same period in 2024.
Nigerian Production Forecasts
📉 Nigeria, the fifth-largest cocoa producer globally, is projected to experience a decrease in production. The Cocoa Association of Nigeria forecasts a -11% year-over-year drop in 2025/26 cocoa production, estimating it at 305,000 metric tons, down from a projected 344,000 metric tons for the 2024/25 crop year. In related news, Nigeria’s cocoa exports rose by 15% year-over-year in August, reaching 17,239 metric tons.
International Cocoa Organization (ICCO) Projections
Record Deficit for 2023/24
📊 The International Cocoa Organization (ICCO) revised its forecast for the 2023/24 global cocoa deficit upwards to 494,000 metric tons, a notable increase from the previous estimate of 441,000 metric tons. This represents the largest deficit recorded in over 60 years, with ICCO reporting a 13.1% year-over-year decline in 2023/24 global cocoa production to 4.380 million metric tons. Consequently, the global cocoa stocks-to-grindings ratio fell to a 46-year low of 27.0%.
Forecasted Surplus for 2024/25
📈 Looking ahead to the 2024/25 season, the ICCO has forecasted a global cocoa surplus of 142,000 metric tons as of February 28, 2024. This projection marks the first surplus in four years and anticipates a 7.8% year-over-year increase in global cocoa production to 4.84 million metric tons.
Final Thoughts
The cocoa market is currently experiencing a complex interplay of factors. While supply-side pressures such as regulatory impacts and reduced inventories are driving prices upward, weakening global demand and improved crop forecasts present significant headwinds.