May ICE NY cocoa (CCK25) today is down -67 (-0.83%), and May ICE London cocoa #7 (CAK25) is down -33 (-0.53%).
Cocoa prices today gave up an early advance and turned lower after a rally in the dollar index (DXY00) to a 1-1/2 week high sparked long liquidation in cocoa futures. Today, cocoa prices initially moved higher on concern about the Ivory Coast's upcoming mid-crop. The mid-crop is the smaller of two annual cocoa harvests, which typically start in April. The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, -9% below last year's 440,000 MT.
Cocoa prices have been on the defensive over the past month, with NY cocoa falling to a 4-month low last Friday and London cocoa posting a 4-month low Monday on an improving supply outlook. On February 28, the International Cocoa Organization (ICCO) forecasted a global cocoa surplus of 142,000 MT for 2024/25, the first surplus in 4 years. ICCO also projected that 2024/25 global cocoa production will rise +7.8% y/y to 4.84 MMT.
The recovery in cocoa inventories is also bearish for prices. Since falling to a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa inventories held in US ports have rebounded and climbed to a 4-1/2 month high of 1,769,953 bags Wednesday.
Also on the bearish side, Nigeria reported on February 27 that its Jan cocoa exports jumped +27% y/y to 46,970 MT. Nigeria is the world's fifth-largest cocoa producer.
Concern about slowing Ivory Coast cocoa exports is a supportive factor for cocoa prices. Monday's government data showed that Ivory Coast farmers shipped 1.41 MMT of cocoa to ports this marketing year from October 1 to March 16, up +12% from last year. However, the pace has fallen from the 35% rise seen in December.
Demand concerns are also weighing on cocoa prices. Executives from chocolate makers Hershey and Mondelez recently warned that high prices are hurting demand. On February 4, Mondelez executives warned of a potential slowdown in chocolate demand when CFO Zarmella said, "We are seeing signs, particularly in parts of the world like North America, where cocoa consumption is coming down." Also, on February 18, the company warned that chocolate prices could rise as much as 50% due to the surge in cocoa prices, which would curb chocolate demand. In addition, Hershey executives said on February 6 that high cocoa prices are forcing it to reformulate recipes by replacing cocoa with other ingredients.
High cocoa prices reduced cocoa demand in Q4, as seen in the quarterly grinding reports. On January 9, the European Cocoa Association reported that Q4 European cocoa grindings fell -5.3% y/y to 331,853 MT, the lowest in more than 4 years. Also, the Cocoa Association of Asia reported that Q4 Asian cocoa grindings fell -0.5% y/y to 210,111 MT, also the lowest in 4 years. In addition, the National Confectioners Association reported that Q4 North American cocoa bean grindings fell -1.2% y/y to 102,761 MT.
Smaller cocoa supplies from Ghana, the world's second-biggest cocoa producer, are supportive for prices after Cocobod, Ghana's cocoa regulator, cut its Ghana 2024/25 cocoa harvest forecast in December for the second time this season to 617,500 MT, down -5% from an August estimate of 650,000 MT.
The ICCO on February 28 said the 2023/24 global cocoa deficit was -441,000 MT, the largest deficit in over 60 years. ICCO said 2023/24 cocoa production fell -13.1% y/y to 4.380 MMT. ICCO said the 2023/24 global cocoa stocks/grindings ratio was 27.0%, a 46-year low.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
