Cocoa prices have experienced a significant decline, reaching seven-week lows as global demand remains sluggish. On March 1, 2024, March ICE New York cocoa (CCH26) fell by 150 points or 2.87%, while March ICE London cocoa #7 (CAH26) decreased by 96 points or 2.51%. This decline comes amidst expectations of continued weak cocoa demand, particularly as key grinding figures for the fourth quarter are set to be released soon.
Analysts anticipate that the upcoming data will reveal a 2.9% year-on-year decline in European cocoa grindings, marking the lowest fourth quarter in over a decade. Furthermore, cocoa grindings in Asia are projected to drop by 12%, also reaching a 10-year low. The adverse demand outlook is compounded by favorable growth conditions in West Africa, which are prompting expectations of a larger cocoa harvest.
Tropical General Investments Group has indicated that the cocoa harvest in the Ivory Coast and Ghana is expected to improve due to larger and healthier pods reported by farmers. According to chocolate manufacturer Mondelez, the latest cocoa pod count in West Africa is 7% above the five-year average and significantly higher than last year’s crop. The harvest of the Ivory Coast’s main crop has commenced, and farmers express optimism regarding its quality.
Despite the current price pressures, there are factors providing some support for cocoa prices. Shipping data reveals that Ivory Coast farmers have exported 1.13 million metric tons (MMT) of cocoa this marketing year, which is 2.6% lower than the same period last year. As the world’s largest cocoa producer, the Ivory Coast’s production levels are closely monitored for their impact on global prices.
In addition, the Bloomberg Commodity Index (BCOM) is expected to attract significant investment with cocoa futures now included. Financial analysts from Citigroup project that this inclusion could bring in approximately $2 billion in new buying of New York cocoa futures. Furthermore, there is a tightening global supply outlook, especially after the International Cocoa Organization (ICCO) revised its global cocoa surplus estimate for 2024/25 to 49,000 MT, down from 142,000 MT. The ICCO also adjusted its production estimate for the same period to 4.69 MMT.
The European Parliament’s recent decision to approve a one-year delay to the deforestation law has kept cocoa supplies ample, allowing EU countries to continue importing agricultural products from deforestation-affected regions. This legislative development poses a challenge for prices, as the supply remains steady.
The Cocoa Association of Asia reported a staggering 17% year-on-year decline in Q3 cocoa grindings, the lowest for the period in nine years. In Europe, the grindings fell by 4.8%, while North American grindings saw a modest increase of 3.2% year-on-year. However, the latter figure may be skewed by the addition of new reporting companies.
In Nigeria, the world’s fifth-largest cocoa producer, production is expected to decline by 11% in the 2025/26 crop year, according to local projections. Despite unchanged cocoa exports in Nigeria for September at 14,511 MT, the overall production outlook remains challenging.
The ICCO had previously revised its global cocoa deficit for the 2023/24 period to a staggering 494,000 MT, the largest deficit recorded in over sixty years. Current trends suggest that the cocoa market is navigating through a complex landscape, with demand and supply dynamics continuing to evolve. As the industry prepares for the future, the impact of these factors on cocoa prices will remain a critical area of observation.
