Cocoa prices have surged sharply, reaching two-week highs as arrivals at ports in the Ivory Coast slow. As of today, March ICE NY cocoa (CCH26) increased by $295, or 4.96%, while March ICE London cocoa #7 (CAH26) rose by $275, or 6.52%. This upward trend has been driven by concerns over tighter supplies following a notable decline in cocoa deliveries.
During the week ending December 28, farmers in the Ivory Coast delivered 59,708 metric tons (MT) of cocoa, marking a 27% decrease compared to the same week last year. Cumulatively, deliveries for the current marketing year, spanning from October 1 to December 28, totaled 1.029 million MT, down 2% from 1.050 million MT in the same period last year. The Ivory Coast, known as the world’s largest cocoa producer, plays a crucial role in global cocoa supply dynamics.
Market Influences and Expectations
Cocoa prices benefit from various underlying factors, including anticipated index-related buying. The addition of cocoa futures to the Bloomberg Commodity Index (BCOM) starting in January is expected to attract approximately $2 billion in purchases of New York cocoa futures, according to Citigroup. Furthermore, cocoa inventories monitored by ICE fell to a 9.5-month low of 1,626,105 bags last Friday, further bolstering price support.
In contrast, favorable weather conditions in West Africa have previously eased cocoa prices. Farmers in the Ivory Coast have reported beneficial rain and sunshine, promoting cocoa tree growth. Similarly, in Ghana, consistent rainfall has aided in pod development ahead of the harmattan season. Recent assessments from chocolate producer Mondelez indicated that the latest cocoa pod count in West Africa is 7% above the five-year average and significantly higher than last year’s harvest.
The ongoing harvest of the Ivory Coast’s main crop has generated optimism among farmers regarding quality. Nonetheless, the global supply outlook remains tight, with the International Cocoa Organization (ICCO) recently revising its 2024/25 cocoa surplus estimate down to 49,000 MT from 142,000 MT. The ICCO also reduced its global cocoa production estimate for the same year to 4.69 million MT, down from 4.84 million MT.
Challenges and Global Demand Trends
Despite the upward pressure on cocoa prices, challenges persist in the market. The European Parliament’s approval of a one-year delay to the deforestation law, known as the EU Deforestation Regulation (EUDR), has maintained an ample supply of cocoa. This regulation aims to combat deforestation linked to agricultural imports, including cocoa from regions experiencing significant deforestation.
Weak global cocoa demand also casts a shadow over prices. The Cocoa Association of Asia reported a 17% year-on-year decline in cocoa grindings for Q3, with figures hitting 183,413 MT, the lowest for this period in nine years. Similarly, the European Cocoa Association noted a 4.8% decline in European cocoa grindings, reaching 337,353 MT, the lowest in a decade. In North America, while cocoa grindings saw a slight increase of 3.2% year-on-year to 112,784 MT, this figure was skewed by the addition of new reporting companies.
Another notable factor is the anticipated decline in cocoa production in Nigeria, the world’s fifth-largest cocoa producer. Projections by Nigeria’s Cocoa Association indicate an 11% year-on-year decrease in production for the 2025/26 crop year, dropping to 305,000 MT from a previously estimated 344,000 MT for 2024/25. Nigeria’s cocoa exports for September remained unchanged year-on-year at 14,511 MT.
In summary, while cocoa prices are currently experiencing a surge due to supply concerns, the market faces challenges from demand fluctuations and regulatory changes. As the global cocoa landscape evolves, producers and consumers alike will be closely monitoring these developments.