Cocoa prices saw moderate declines today, with March ICE NY cocoa (CCH25) falling by $101 (-0.92%) and March ICE London cocoa #7 (CAH25) dropping by $94 (-1.08%). The decrease comes as favorable rains in key West African cocoa-producing nations, such as the Ivory Coast and Ghana, have enhanced soil moisture levels, benefiting cocoa tree development.
Recent rainfall has prompted the re-flowering of cocoa trees, boosting optimism among farmers in these regions. However, while weather conditions have improved crop prospects, cocoa price losses have been capped by concerns over the pace of cocoa exports from the Ivory Coast.
Ivory Coast Cocoa Exports Slow Amid Positive Crop Outlook
Government data released Monday indicated that Ivory Coast farmers have shipped 1.29 million metric tons (MMT) of cocoa this marketing year, a 22% year-over-year increase. However, this growth has slowed significantly from the 35% rise recorded in December, raising concerns over the country’s export performance in the coming months.
Despite this, production concerns in the region remain bullish for cocoa prices. Maxar Technologies, a weather forecasting company, reported that this year’s Harmattan winds—the dry and dusty winds typical for the season—are the driest in six years, exacerbating crop conditions. Farmers in the Ivory Coast and Ghana have reported damage to their cocoa trees, with leaves turning yellow and pods withering, as a result of the harsh winds.
Global Cocoa Deficit Could Worsen
The global cocoa market continues to face tight supplies. The International Cocoa Organization (ICCO) recently revised its global cocoa deficit estimate for the 2023/24 season to 478,000 metric tons, up from an earlier estimate of 462,000 metric tons. Additionally, the ICO’s survey revealed that global cocoa stockpiles at the end of the 2023/24 season had fallen by 36% year-over-year to 1.041 MMT, signaling the possibility of a more significant global cocoa deficit than previously anticipated.
Inventories of cocoa monitored by the ICE in U.S. ports have also been on a downward trend for over a year, hitting a 21-year low of 1,263,493 bags on January 24.
Hershey’s Move Signals Tight Supply Concerns
Amid growing supply shortages, Hershey Co. has sought approval from the U.S. Commodity Futures Trading Commission (CFTC) to purchase a large volume of cocoa on the ICE Futures Exchange. Bloomberg reported that Hershey intends to acquire more than 90,000 metric tons of cocoa—more than nine times the current exchange limit. This move underlines the severe shortage in cocoa supplies, with the cost of securing cocoa via futures contracts now cheaper than purchasing it on the physical market.
Potential Demand Destruction Curbing Price Rally
While supply-side pressures have been supportive of cocoa prices, there are growing concerns about demand. The European Cocoa Association reported a 5.3% decline in cocoa grindings for the fourth quarter of 2023, marking the lowest level in more than four years. Similarly, the Cocoa Association of Asia reported a slight decrease of 0.5% in Q4 grindings, while North American grindings fell by 1.2%. These figures highlight the impact of high cocoa prices on demand, with some regions seeing a notable contraction in consumption.
Nigeria’s Cocoa Exports Increase
The recent surge in Nigerian cocoa exports also poses a bearish factor for cocoa prices. December exports from Nigeria, the world’s sixth-largest cocoa producer, rose by 87% year-over-year to 46,696 metric tons, contributing to growing global supplies.
Regional Production Estimates Shift
In addition to weather-related concerns, the Ivory Coast’s 2024/25 cocoa production estimate was recently revised upward by the country’s regulator, Le Conseil Cafe-Cacao, to a range of 2.1-2.2 MMT, up from a previous forecast of 2.0 MMT. On the other hand, Ghana, the world’s second-largest producer, has faced difficulties, with its 2023/24 cocoa harvest dropping to a 23-year low of 425,000 metric tons due to adverse weather conditions and crop diseases. In response, Ghana’s Cocoa Board (Cocobod) cut its 2024/25 cocoa production estimate to 650,000 metric tons from an earlier forecast of 700,000 metric tons.
Outlook for Cocoa Prices
As the cocoa market contends with these varying factors—favorable rains, supply tightness, potential demand destruction, and fluctuating regional production estimates—the outlook for cocoa prices remains uncertain. While the global cocoa deficit continues to support price levels, the slowing export growth from the Ivory Coast and weakening demand in key markets may limit significant price increases in the near term.
Related topics
