Cocoa futures soared on Friday, driven by worsening weather conditions in West Africa and mounting fears over global supply. July ICE New York cocoa closed up by +6.25%, hitting a 3.25-month high, while July ICE London cocoa gained +5.24%, reaching a 3-month peak.
Drought Persists in Ghana and Ivory Coast Despite Rainfall
According to the African Flood and Drought Monitor, more than one-third of Ghana and Ivory Coast, the world’s two largest cocoa producers, remains under drought stress despite recent rains. This prolonged dry weather continues to threaten yields, particularly for the current mid-crop harvest in Ivory Coast.
Mid-Crop Quality Issues Raise Alarm Among Processors
Concerns over bean quality are also fueling the rally. Ivory Coast cocoa processors report that 5% to 6% of beans in each truckload are substandard—far higher than the typical 1% defect rate during the main harvest. Several shipments have been rejected, adding further strain to the supply chain.
Analysts at Rabobank link the drop in quality to delayed rainfall, which stunted pod development. The Ivory Coast’s mid-crop harvest, which runs from April to September, is estimated at 400,000 metric tons, a 9% decline from last year’s 440,000 MT.
Export Pace Slows in Ivory Coast
Although exports from Ivory Coast between October 1 and May 11 rose +11.4% year-over-year to 1.56 million metric tons (MMT), the pace has slowed significantly compared to the +35% surge recorded in December. This deceleration adds to concerns over future supply tightness.
Inventory Rebound May Cap Price Rally
On the other hand, cocoa inventories are rebounding. ICE-monitored cocoa stocks at U.S. ports reached 2.15 million bags on Friday—a 7.5-month high, after falling to a 21-year low in January. This inventory build could limit further price spikes in the short term.
Rising Costs Threaten Consumer Demand
Global chocolate demand is facing headwinds as cocoa prices continue to rise. Major confectionery companies are already warning of higher prices and reduced consumer spending:
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Barry Callebaut AG, one of the world’s largest chocolate manufacturers, recently cut its full-year sales guidance, citing high cocoa prices and tariff uncertainty.
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Hershey Co. reported a 14% decline in Q1 sales and forecasted an additional $15–$20 million in tariff-related costs in Q2, which could further raise chocolate prices.
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Mondelez International also posted disappointing Q1 results and noted that consumers are cutting back on snack spending amid economic pressure and expensive cocoa products.
Demand Side Still Shows Resilience
Despite pricing concerns, Q1 cocoa grindings — a key indicator of global demand — outperformed expectations:
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North America: -2.5% YoY to 110,278 MT (vs. -5% expected)
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Europe: -3.7% YoY to 353,522 MT (vs. -5% expected)
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Asia: -3.4% YoY to 213,898 MT (vs. -5% expected)
These smaller-than-expected declines suggest that global demand, while softening, remains relatively stable.
Ghana’s 2024/25 Forecast Cut Again
Cocoa prices also found support from Ghana, the second-largest producer globally, where the Ghana Cocoa Board (Cocobod) reduced its 2024/25 harvest forecast for the second time to 617,500 MT, down 5% from earlier estimates.
Global Deficit Reaches Historic Levels
The International Cocoa Organization (ICCO) reported in February that the 2023/24 global cocoa deficit reached -441,000 MT, marking the largest shortfall in over 60 years. Cocoa production dropped -13.1% YoY to 4.38 MMT, and the global stocks-to-grindings ratio fell to 27%, a 46-year low.
However, ICCO projects a turnaround in 2024/25, forecasting a global surplus of 142,000 MT — the first in four years — alongside a 7.8% increase in global production to 4.84 MMT.
Conclusion:
Cocoa markets are at a critical juncture. Weather-driven supply risks, mid-crop quality concerns, and slowing exports are driving prices higher, even as inventories rise and consumer demand shows signs of strain. With the global cocoa market experiencing its worst deficit in decades, the coming months will be crucial in determining whether a projected 2024/25 surplus can stabilize the market — or if further volatility lies ahead.