Dollar Strength Pushes Down Cocoa Prices
New Article:
Cocoa's Price Struggles: IVC's Mid-Crop Woes and Market Volatility
Thursday saw a slide in cocoa prices as July ICE NY cocoa (CCN25) dipped -130 (-1.41%), and July ICE London cocoa #7 (CAN25) plummeted -128 (-1.91%).
The dollar index (DXY00) surged to a 3-1/2 week high, triggering some long position liquidation pressure in cocoa futures following Tuesday's rally. Initially, cocoa prices climbed higher, with NY cocoa hitting a 1-week high and London cocoa reaching a 1-month high.
However, concerns about the Ivory Coast cocoa mid-crop, currently underway, are bolstering prices. Processors have expressed concerns about the crop's quality, with as much as 5% to 6% of the mid-crop cocoa deemed unsatisfactory in comparison to the 1% during the main crop. industry experts attribute these quality issues to late rains in the region that hampered crop growth[4].
Rabobank reports that this year's Ivory Coast mid-crop is estimated to amount to 400,000 metric tons (MT), marking a 9% drop from the 440,000 MT of the previous year. On April 25, NY cocoa prices peaked at a 2-1/2 month high due to supply concerns as the pace of Ivory Coast cocoa exports has begun to lag[4].
Meanwhile, concerns about the global trade war may be weighing on consumer demand and prices. Mondelez International reported weaker-than-expected Q1 sales, while Hershey Co. forecasted a -14% drop in Q1 sales and expects $15-$20 million of tariff costs in Q2[2].
Current cocoa inventories are adding bearish sentiments to the market. After reaching a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa inventories in US ports have made a comeback, climbing to a 7-1/4 month high of 2,107,210 bags on Wednesday[4].
Cocoa prices are also being affected by contradictory signals. Last week, Nigerian Mar cocoa exports increased by 24%, boosting supply[1]. However, better-than-expected Q1 grindings in North America, Europe, and Asia have offered some support for cocoa prices[1].
The International Cocoa Organization (ICCO) anticipates a surplus of 142,000 MT for the 2024/25 season, the first surplus in 4 years[3]. However, persistent smaller cocoa supplies from Ghana, the world's second-biggest cocoa producer, may mitigate potential oversupply[1].
Disclaimer: Rich Asplund had no positions in any of the securities mentioned in this article as of the publication date. For more information, please view the Disclosure Policy here.
Enrichment Connections:- Ivory Coast's Mid-Crop Cocoa Quality Concerns: The Ivory Coast mid-crop cocoa is facing quality issues, with 5% to 6% of the beans in each truckload being deemed poor quality[4]. These quality issues have been attributed to late-arriving rains in the region, which have limited crop growth[2][3].- Impact on Cocoa Prices: Despite concerns about the global trade war and potential declines in consumer demand, the quality concerns stemming from the Ivory Coast mid-crop have been instrumental in maintaining or even increasing cocoa prices[1][3]. On May 8, 2025, NY cocoa prices recorded a 1-week high, and London cocoa prices climbed to a 1-month high due to these supply concerns[2].
- The forecast for cocoa prices remains uncertain, with the ongoing quality concerns about the Ivory Coast mid-crop cocoa contributing to maintaining or even increasing prices, despite potential liquidation pressure on cocoa futures due to the surge in the dollar index (DXY00).
- In sports metaphors, the cocoa market is currently playing a seesaw game, with the quality issues in Ivory Coast's mid-crop boosting prices, while increased Nigerian exports and a possible surplus predicted by the International Cocoa Organization (ICCO) could potentially weigh down the average price of cocoa.
- Despite the average cocoa inventory in US ports climbing to a 7-1/4 month high, concerns about the quality of the Ivory Coast mid-crop cocoa have offset bearish sentiments and kept cocoa prices from plunging, as evidenced by the recent highs reached by NY and London cocoa prices.
