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Cocoa Prices Fluctuate Amid Global Supply Concerns

Cocoa prices see divergence as NY cocoa rises and London cocoa falls. Reports suggest weak harvests and rising global cocoa inventories are affecting market dynamics. Demand concerns emerge as major chocolate makers adjust to high prices.

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The recent reports on cocoa prices indicate a complex market driven by various factors affecting supply and demand. The NY cocoa has witnessed a rise of 3.60%, largely due to concerns about a weak mid-crop mainly in West Africa, particularly in the Ivory Coast where crop estimates have dropped by 9% compared to the previous year. This situation creates a supply squeeze, supporting cocoa prices despite the bearish trend seen in London cocoa due to currency fluctuations.

**Supply Disruptions Impacting Prices**
As the mid-crop season unfolds, the average forecast for this year's Cocoa harvest in the Ivory Coast stands at 400,000 MT, which is significantly down from last year's 440,000 MT. The slower export pace from the Ivory Coast, with shipments up by only 11% compared to a year earlier, bolsters the upward pressure on prices amid supply concerns.

In contrast, the market has also seen previously bearish trends due to recovering cocoa inventories, hitting a five-month high as stocks surged from a record low in January. It must be noted that the overall production is on the rise, with the ICCO projecting a surplus of 142,000 MT for the year 2024/25. These signals suggest a potential for oversupply in the future, which could weigh on cocoa prices.

**Demand Concerns from Major Chocolate Producers**
One of the noteworthy aspects impacting cocoa prices is the demand side; major players like Hershey and Mondelez have flagged concerns about high cocoa prices leading to reduced consumption. Reports indicate that cocoa grindings in both Europe and Asia have fallen to the lowest in over four years—suggesting that consumers are starting to feel the pinch of increasing chocolate prices, leading to potential decreases in demand. This sentiment could foreshadow softer market conditions ahead if prices do not adjust.

Furthermore, the forecasts from the ICCO showing a drastic deficit of -441,000 MT in the production period 2023/24, the largest seen in decades, hint at a volatile market landscape ahead. Investors should continue to monitor both supply chain issues and demand trends closely, as these factors will undoubtedly influence cocoa price movements in the coming months.

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