March ICE NY cocoa (CCH25) today is down -155 (-1.50%), and March ICE London cocoa #7 (CAH25) is up +26 (+0.32%).
NY cocoa prices are trading lower today after Mondelez executives said on Tuesday that chocolate prices could rise as much as 50% due to the surge in cocoa prices, which would be negative for chocolate demand.
Cocoa prices have underlying support from concerns about the West African cocoa crop. Cocoa farmers in the Ivory Coast are reporting that the mid-crop harvest prospects look poor due to the long dry season. Forecaster Maxar Technologies said this year's seasonal Harmattan winds are the driest in six years, worsening crop conditions.
Concern about slowing Ivory Coast cocoa exports is a supportive factor for cocoa prices. While government data Monday showed Ivory Coast farmers shipped 1.34 MMT of cocoa to ports so far in this marketing year from October 1 to February 16, up +20% from last year, the pace has fallen from the 35% rise seen in December.
Cocoa prices have recently been undercut by concern about slowing cocoa demand. Chocolate maker Hershey said on February 6 that high cocoa prices are forcing it to reformulate recipes by replacing cocoa with other ingredients. Chocolate maker Mondelez International on February 4 pointed to 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."
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.
Tight global cocoa inventories are bullish for prices. ICE-monitored cocoa inventories held in US ports have been trending lower for the past 1-1/2 years and, on January 24, fell to a 21-year low of 1,263,493 bags. Cocoa inventories have since modestly recovered to 1,386,333 bags as of Tuesday.
In a bullish factor, the International Cocoa Association (ICCO) on November 22 raised its 2023/24 global cocoa deficit estimate to -478,000 MT from May's -462,000 MT, the largest deficit in over 60 years. ICCO also cut its 2023/24 cocoa production estimate to 4.380 MMT from May's 4.461 MMT, down -13.1% y/y. ICCO projected a 2023/24 global cocoa stocks/grindings ratio of 27.0%, a 46-year low.
