May ICE NY cocoa (CCK25) Monday closed up +445 (+5.32%), and May ICE London cocoa #7 (CAK25) did not trade with markets in London closed for the Easter Monday holiday.
May NY cocoa rallied sharply to a 2-week high Monday on positive carryover from last week’s news that showed better-than-expected global cocoa demand. Q1 North American cocoa grindings fell -2.5% y/y to 110,278 MT, better than expectations of at least a -5% y/y fall. Also, Q1 European cocoa grindings fell -3.7% y/y to 353,522 MT, a smaller decline than expectations for a -5% y/y drop. In addition, Q1 Asian cocoa grinding fell -3.4% y/y to 213,898 MT, a smaller decline than expectations for a fall of at least -5% y/y.
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Earlier this month, NY cocoa fell to a 1-month low, and London cocoa dropped to a 5-month low due to concern that consumer demand for cocoa and cocoa products will decline as the global trade war escalates and tariffs boost already-high cocoa prices. On April 10, Barry Callebaut AG, one of the world’s biggest chocolate makers, cut its annual sales guidance in the face of high cocoa prices and tariff uncertainty.
The recovery in cocoa inventories is also bearish for prices. Since falling to a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa inventories held in US ports have rebounded and climbed to a 6-month high Monday of 1,905,025 bags.
An improving supply outlook is negative for cocoa prices. On February 28, the International Cocoa Organization (ICCO) forecasted a global cocoa surplus of 142,000 MT for 2024/25, the first surplus in 4 years. ICCO also projected that 2024/25 global cocoa production will rise +7.8% y/y to 4.84 MMT.
Concern about the Ivory Coast’s upcoming mid-crop is supportive of cocoa prices. On April 3, NY cocoa rose to a 2-month high on signs of a weak mid-crop cocoa harvest in West Africa. According to Rabobank, late-arriving rains in the region have limited crop growth, and recent cocoa farmer surveys from the Ivory Coast and Ghana have been disappointing. The mid-crop is the smaller of two annual cocoa harvests, which typically starts this month. The average estimate for this year’s Ivory Coast mid-crop is 400,000 MT, down -9% from last year’s 440,000 MT.
Recent Ivory Coast cocoa exports have slowed, supporting prices. Last Monday’s government data showed that Ivory Coast farmers shipped 1.45 MMT of cocoa to ports this marketing year from October 1 to April 13, up +10.7% from last year but down from the much larger 35% rise seen in December.
Demand concerns are weighing on cocoa prices. Executives from chocolate makers Hershey and Mondelez recently warned that high prices are hurting demand. On February 4, Mondelez executives warned of a potential slowdown in chocolate demand when CFO Zarmella said, “We are seeing signs, particularly in parts of the world like North America, where cocoa consumption is coming down.” Also, on February 18, the company warned that chocolate prices could rise as much as 50% due to the surge in cocoa prices, which would curb chocolate demand. In addition, Hershey executives said on February 6 that high cocoa prices are forcing it to reformulate recipes by replacing cocoa with other ingredients.
Also on the bearish side, Nigeria reported on February 27 that its Jan cocoa exports jumped +27% y/y to 46,970 MT. Nigeria is the world’s fifth-largest cocoa producer.
Smaller cocoa supplies from Ghana, the world’s second-biggest cocoa producer, are supportive for prices after Cocobod, Ghana’s cocoa regulator, cut its Ghana 2024/25 cocoa harvest forecast in December for the second time this season to 617,500 MT, down -5% from an August estimate of 650,000 MT.
The ICCO on February 28 said the 2023/24 global cocoa deficit was -441,000 MT, the largest deficit in over 60 years. ICCO said 2023/24 cocoa production fell -13.1% y/y to 4.380 MMT. ICCO said the 2023/24 global cocoa stocks/grindings ratio was 27.0%, a 46-year low.
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