Cocoa Prices Pull Back Amid Indications of Increased Nigerian Exports

Today, the cocoa market is witnessing a noticeable downturn. July ICE NY cocoa (CCN25) has dropped by a significant -4.72%, or -443 points, landing at the current price. Similarly, May ICE London cocoa #7 (CAK25) has seen a drop of -3.27%, or -212 points.

The decrease in cocoa prices can be attributed to a report by Bloomberg suggesting an increase of +24% year-on-year in Nigerian Mar cocoa exports, making Nigeria the fifth-largest cocoa producer globally. This influx of cocoa supplies has raised concerns about the overall global cocoa supply.

A rebound in current cocoa inventories has also contributed to the bearish sentiment surrounding prices. US port inventories have risen from a 21-year low of 1,263,493 bags to a 6-1/4 month high of 1,962,651 bags last Friday.

Interestingly, last Friday also saw a 2-1/4 month high in NY cocoa due to supply concerns as the pace of Ivory Coast cocoa exports has slowed. However, today's government data showed that Ivory Coast farmers shipped 1.5 MMT of cocoa to ports this marketing year from October 1 to April 27, up +12% from the previous year but still down from the much larger +35% increase seen in December.

Cocoa prices have also been positively impacted by recent news indicating better-than-expected global cocoa demand. Q1 North American cocoa grindings fell a more modest -2.5% y/y to 110,278 MT, a more positive sign compared to expectations of at least a -5% y/y fall. Similarly, Q1 European cocoa grindings fell -3.7% y/y to 353,522 MT, a smaller decline than anticipated for a -5% y/y drop. In addition, Q1 Asian cocoa grinding fell -3.4% y/y to 213,898 MT, a smaller decline than forecasted for a fall of at least -5% y/y.

Despite these positive signs, concerns about the upcoming Ivory Coast mid-crop persist. Delayed rains in the region have limited crop growth, and recent farmer surveys from Ivory Coast and Ghana have been disappointing. The mid-crop is the smaller of two annual cocoa harvests, typically starting this month. The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down -9% from last year's 440,000 MT.

At the beginning of April, NY cocoa declined to a 1-month low, and London cocoa dropped to a 5-month low due to concerns over a potential decline in consumer demand for cocoa and cocoa products as global trade wars escalate and tariffs boost already-high cocoa prices. This concern was further highlighted when Barry Callebaut AG, one of the world's biggest chocolate makers, cut its annual sales guidance in the face of high cocoa prices and tariff uncertainty.

However, it's important to note that the International Cocoa Organization (ICCO) forecasted a global cocoa surplus of 142,000 MT for 2024/25, the first surplus in four years. They also projected that 2024/25 global cocoa production will rise +7.8% y/y to 4.84 MMT.

Smaller cocoa supplies from Ghana, the world's second-biggest cocoa producer, offer some support 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.

In conclusion, the global cocoa market is experiencing a complex interplay of supply challenges, demand fluctuations, and macroeconomic factors, leading to significant price volatility. Weather conditions, stock levels, long-term deficits, demand dynamics, external factors, and price trends are all contributing to this volatility. Stay informed and adapt your investments accordingly to navigate the uncertain cocoa market.

Despite the recent increase of +24% year-on-year in Nigerian March cocoa exports, making Nigeria the fifth-largest cocoa producer globally, the average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down -9% from last year's 440,000 MT.
The rebound in current cocoa inventories, with US port inventories rising to a 6-1/4 month high of 1,962,651 bags last Friday, has contributed to the bearish sentiment surrounding prices in the global cocoa market.
Last April, NY cocoa declined to a 1-month low, and London cocoa dropped to a 5-month low due to concerns over a potential decline in consumer demand for cocoa and cocoa products as global trade wars escalate and tariffs boost already-high cocoa prices.