Cocoa Prices Close Higher on Tighter Inventories

December ICE NY cocoa (CCZ25) on Wednesday closed up +56 (+0.80%), and December ICE London cocoa #7 (CAZ25) closed up +33 (+0.68%).

Cocoa prices settled higher on Wednesday, finding support from signs that recent low prices have started to spur demand from commercial buyers and end-users.

Also, tighter cocoa inventories are supportive for prices after ICE-monitored cocoa inventories held in US ports fell to a 4.75-month low of 1,991,715 bags on Wednesday.  In related news, Nigeria reported that its July cocoa exports fell -22% y/y to 13,579 MT.

On Tuesday, NY cocoa fell to a 10.75-month low and London cocoa fell to a 2.25-month low as beneficial rains in the Ivory Coast bolstered the outlook for the region’s cocoa crop and weighed on prices.  Chocolate maker Mondelez recently said that the latest cocoa pod count in West Africa is 7% above the five-year average and “materially higher” than last year’s crop.  The harvest of the Ivory Coast’s main crop is expected to begin next month, and farmers are optimistic about the quality of the crop.

Cocoa prices have also been under pressure over the past six weeks amid fears that high cocoa prices and tariffs could dampen chocolate demand.  Chocolate maker Lindt & Sprüngli AG lowered its margin guidance for the year in July due to a larger-than-expected decline in first-half chocolate sales.  Additionally, chocolate maker Barry Callebaut AG reduced its sales volume guidance for a second time in three months in July, citing persistently high cocoa prices.  The company projects a decline in full-year sales volume and reported a -9.5% drop in its sales volume for the March-May period, the biggest quarterly decline in a decade.

The slowdown in the pace of cocoa exports from the Ivory Coast is bullish for cocoa prices.  Monday’s government data showed that Ivory Coast farmers shipped 1.82 MMT of cocoa to ports this marketing year from October 1 to September 21, up +4.6% from last year but down from the much larger +35% increase seen in December.

Cocoa prices previously rallied to two-month highs last month, on concerns that cold and dry weather across West Africa’s cocoa-producing regions is slowing down plant development in the Ivory Coast and proliferating black pod disease in Ghana and Nigeria.  According to the Commodity Weather Group, the past 60 days for West Africa cocoa were the driest on record since 1979.  The lack of rain could impact the retention of cocoa pods on trees before the main crop harvest that starts in October.

Quality concerns regarding the Ivory Coast’s mid-crop cocoa, which is currently being harvested through September, are supportive of prices.  According to Rabobank, the poor quality of the Ivory Coast’s mid-crop is partly attributed to late-arriving rain in the region, which limited crop growth.  The mid-crop is the smaller of the two annual cocoa harvests, which typically starts in April.  The average estimate for this year’s Ivory Coast mid-crop is 400,000 MT, down -9% from last year’s 440,000 MT.

Another supportive factor for cocoa is the smaller cocoa production in Nigeria, the world’s fifth-largest cocoa producer.  Nigeria’s Cocoa Association projects Nigeria’s 2025/26 cocoa production will fall -11% y/y to 305,000 MT from a projected 344,000 MT for the 2024/25 crop year.

Weakness in global cocoa demand has been a bearish factor for cocoa prices.  The European Cocoa Association reported on July 17 that Q2 European cocoa grindings fell by -7.2% y/y to 331,762 MT, a bigger decline than expectations of -5% y/y.  Also, the Cocoa Association of Asia reported that Q2 Asian cocoa grindings fell -16.3% y/y to 176,644 MT, the smallest amount for a Q2 in 8 years.  North American Q2 cocoa grindings fell -2.8% y/y to 101,865 MT, which was a smaller decline than the declines seen in Asia and Europe.

Higher cocoa production by Ghana is bearish for cocoa prices.  On July 1, the Ghana Cocoa Board projected the 2025/26 Ghana cocoa crop would increase by +8.3% y/y to 650,000 from 600,000 MT in 2024/25.  Ghana is the world’s second-largest cocoa producer.

On May 30, the International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit to -494,000 MT from a February estimate of -441,000 MT, the largest deficit in over 60 years.  ICCO said 2023/24 cocoa production fell by 13.1% y/y to 4.380 MMT.  ICCO stated that the 2023/24 global cocoa stocks-to-grindings ratio declined to a 46-year low of 27.0%.  Looking ahead to 2024/25, ICCO forecasted a global cocoa surplus of 142,000 MT on February 28, 2024, marking the first surplus in four years.  ICCO also projected that 2024/25 global cocoa production will rise +7.8% y/y to 4.84 MMT.

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