Key Takeaways
- Cocoa futures saw a modest increase, with December NY and London contracts closing higher on Thursday.
- Shrinking ICE-monitored cocoa inventories in U.S. ports, reaching a 7-month low, triggered short-covering.
- Weakness in the British pound also provided support for London cocoa prices.
- Concerns over chocolate demand, highlighted by Hershey’s CEO, initially pressured prices.
- Global cocoa grindings in Q3 showed declines in Asia and Europe, indicating softening demand.
Market Performance and Inventory Dynamics
December ICE NY cocoa futures (<a rel=nofollow noopener noreferrer target=_blank href=https://www.barchart.com/futures/quotes/CC0/overview>CCZ25) finished Thursday up by 14 points, a 0.23% gain. Similarly, December ICE London cocoa #7 futures (<a rel=nofollow noopener noreferrer target=_blank href=https://www.barchart.com/futures/quotes/CA0/overview>CAZ25) closed higher by 19 points, representing a 0.44% increase.
💡 Cocoa prices rebounded from earlier losses to settle positively, largely driven by short-covering activity spurred by dwindling ICE cocoa inventories. On Thursday, ICE-monitored cocoa stockpiles held at U.S. ports decreased to their lowest point in seven months, standing at 1,819,808 bags.
📍 Support for London cocoa also emerged on Thursday due to a weakening British pound (^GBPUSD). The pound experienced its most significant drop in 6.5 months, which bolstered cocoa prices as they are denominated in sterling.
Demand Concerns and Supply Outlook
Cocoa prices experienced initial downward pressure on Thursday amid apprehensions about consumer demand for chocolate. Remarks from the CEO of Hershey expressed disappointment with Halloween season chocolate sales, a period that typically accounts for nearly 18% of annual U.S. candy sales, second only to Christmas.
📊 Mondelez, another confectionery giant, recently indicated that the latest cocoa pod count in West Africa is 7% above the five-year average and significantly higher than the previous year’s harvest. The main crop harvest in Ivory Coast, the world’s largest cocoa producer, has commenced, with farmers reporting optimism about the crop’s quality.
📉 Conversely, cocoa prices are being supported by a notable slowdown in exports from Ivory Coast. Government data released on Monday revealed that Ivorian farmers exported 215,219 metric tons of cocoa to ports between October 1 and October 26 of the current marketing year, a decrease of 24% compared to the 284,633 metric tons shipped during the same period last year.
Global Demand Indicators
The broader global demand for cocoa remains a bearish factor for prices. The Cocoa Association of Asia reported on October 17 that third-quarter cocoa grindings in Asia fell by 17% year-over-year to 183,413 metric tons, marking the lowest third-quarter grindings in nine years.
Similarly, the European Cocoa Association stated on October 16 that third-quarter European cocoa grindings declined by 4.8% year-over-year to 337,353 metric tons, hitting a ten-year low for the third quarter. In North America, the National Confectioners Association reported a 3.2% year-over-year increase in third-quarter cocoa grindings to 112,784 metric tons; however, this rise was attributed to the inclusion of newly reporting companies, which may have skewed the figures.
Market Pressures and Production Nuances
Cocoa prices have faced headwinds over the past two months, primarily due to concerns that elevated cocoa prices and tariffs could suppress chocolate consumption. Data from research firm Circana indicated that North American sales volume for chocolate candy decreased by over 21% in the 13 weeks ending September 7, compared to the same period in the prior year.
In Ghana, the world’s second-largest cocoa producer, cocoa arrivals at ports have surged. In the four weeks ending September 4, Ghana received 50,440 metric tons of cocoa, a significant increase from approximately 11,000 metric tons delivered during the same period in 2024.
⚡ A supportive factor for cocoa prices is the projected decrease in production from Nigeria, the fifth-largest global producer. The Cocoa Association of Nigeria forecasts that Nigeria’s 2025/26 cocoa production will fall by 11% year-over-year to 305,000 metric tons, down from an estimated 344,000 metric tons for the 2024/25 crop year. In related news, Nigeria reported a 15% year-over-year increase in its August cocoa exports, reaching 17,239 metric tons.
International Cocoa Organization Projections
On May 30, the International Cocoa Organization (ICCO) revised its global cocoa deficit forecast for 2023/24 to -494,000 metric tons, the largest deficit recorded in over 60 years. The ICCO noted that 2023/24 cocoa production fell by 13.1% year-over-year to 4.380 million metric tons. Furthermore, the global cocoa stocks-to-grindings ratio for 2023/24 declined to a 46-year low of 27.0%.
Looking ahead to 2024/25, the ICCO estimates a global cocoa surplus of 142,000 metric tons, which would mark the first surplus in four years. The organization also projects a 7.8% year-over-year increase in global cocoa production for 2024/25, reaching an estimated 4.84 million metric tons.
Expert Summary
Cocoa futures experienced a slight gain amid diminishing inventories and currency fluctuations, despite ongoing concerns about chocolate demand. While global grindings suggest softening consumer interest, production forecasts and export data from key producing nations paint a mixed picture for supply dynamics.