Cocoa Prices Collapse Amid Trade Concerns and Demand Woes

Cocoa prices plummet with fears of trade wars affecting demand. As the mid-crop harvest approaches with poor forecasts, chocolate giants warn of declining consumption due to soaring costs. This market sentiment could lower stock prices for associated companies in the industry.

Date: 08-04-2025

AI Rating: 4

Impact of Trade Concerns: The recent decline in cocoa prices can be attributed mainly to escalating global trade war fears that have invoked a risk-off sentiment across asset markets. As tariffs on cocoa products rise, the concern over consumer demand has intensified, potentially leading to a downtrend in revenue for chocolate companies.

Consumer Demand Warning: Notably, major chocolate manufacturers such as Hershey and Mondelez have reported that high cocoa prices are negatively affecting their sales. Mondelez's CFO highlighted a concerning trend in North America where cocoa consumption is reportedly declining. Such consumer behavior could lead to decreased revenue growth for companies involved in cocoa and chocolate production, directly influencing their stock prices.

Supply Issues: Despite current bearish pricing, potential shortages in the mid-crop from the Ivory Coast may cushion prices. However, the overall forecast remains bleak with the International Cocoa Organization (ICCO) predicting significant production deficits and rising inventories that could further inhibit price recovery. The anticipated surplus might diminish investor confidence in cocoa trading companies.

Market Sentiment: Recent reports indicate a significant drop in cocoa grinding across key markets, marking this as the lowest grinding volume in over four years. This decline in grinding activity signals lower demand and could lead to overload in supply, further pressuring prices.

Stocks: HSY MDLZ