Drop in Cocoa Prices as Fears Over Supply Reduce
The global cocoa market has been experiencing a rollercoaster ride in recent months, with prices reaching historic highs due to a significant contraction in global supply. According to the International Cocoa Organization (ICCO), the 2023/24 global cocoa deficit has been revised to -494,000 MT, marking the largest deficit in over 60 years [1].
This supply crunch was exacerbated by low export arrivals in Côte d'Ivoire and concerns over a supply chokepoint, despite a year-on-year increase in exports by 6.1% [3][4]. Weather patterns, notably dry weather and below-average rainfall combined with high temperatures in key producing regions, have been bullish for prices given the crop's sensitivity to climate [3].
Seasonal demand also plays a role in cocoa prices, with consumption increasing ahead of retail periods like Easter and Christmas, supporting short-term price gains. However, demand tends to normalize and prices may decline after these peaks unless supply remains tight [2].
In June, cocoa futures experienced an 8% surge based on short-term supply concerns. However, price momentum softened due to improved rainfall in Côte d'Ivoire, optimistic crop outlooks for Ghana, and better-than-expected production in Latin America easing some supply risks [4].
Forecasts remain bullish for cocoa prices, with algorithmic models predicting continued increases through 2025 and beyond, supported by underlying supply constraints and climate risks [2].
Cocoa prices have eased due to speculation that cocoa will be exempt from President Trump's tariffs, but concerns about a slowdown in the pace of Ivory Coast cocoa exports have caused prices to rally to 1-month highs earlier this week [4][5]. The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down -9% from last year's 440,000 MT, and cocoa processors are complaining about the poor quality of the Ivory Coast's mid-crop cocoa [6].
Chocolate maker Lindt & Spruengli AG lowered its margin guidance for the year due to a larger-than-expected decline in first-half chocolate sales [7]. Cocoa prices for September ICE NY (CCU25) are down -223 (-2.62%), while Cocoa prices for September ICE London #7 (CAU25) are down -150 (-2.65%) [8].
Looking ahead, the market will continue to be influenced by weather conditions in West Africa, export rates, and seasonal demand patterns. The potential for stabilization or correction in cocoa prices depends on whether weather and production outlooks improve further.
References:
- ICCO revised 2023/24 global cocoa deficit to -494,000 MT
- Cocoa Prices: What's Driving the Market?
- Ivory Coast farmers shipped 1.75 MMT of cocoa to ports this marketing year
- Cocoa Prices Rally to 1-Month Highs on Slow Ivory Coast Exports
- US Commerce Secretary Lutnick mentioned that goods not produced in the US could be exempted from tariffs
- Cocoa processors are complaining about the poor quality of the Ivory Coast's mid-crop cocoa
- Chocolate maker Lindt & Spruengli AG lowered its margin guidance for the year
- Cocoa prices for September ICE NY (CCU25) are down -223 (-2.62%)
- Cocoa prices for September ICE London #7 (CAU25) are down -150 (-2.65%)
Despite the global turmoil in the cocoa market, there is a scarcity of news about sports, with prices reaching historic highs due to a significant contraction in global supply. The upcoming Olympic Games could potentially introduce cocoa-based products as part of their sponsorship deals, offering a unique opportunity for the industry to tap into the sports world.