Cocoa Prices Hit 4-Month Lows, Demand and Supply Factors Examined

Cocoa prices are now at their lowest in over four months. Factors affecting prices include increasing global production and recovering inventories. Demand concerns, particularly from major chocolate manufacturers, are also notable.

Date: 22-03-2025

AI Rating: 5

Market Overview: Cocoa prices have recently dropped to a 4-1/4 month low, with significant declines observed in both the ICE NY and London cocoa markets. The drop in prices is largely attributed to an improving supply outlook which foresees a global cocoa surplus for the first time in four years.

Earnings Impact: The report highlights that chocolate manufacturers, including Hershey and Mondelez, are experiencing declining demand due to high cocoa prices, leading to possible reductions in their profit margins. High prices have also led to reformulation of products by these companies, suggesting a potential decrease in revenue from cocoa-based products.

Supply Dynamics: The International Cocoa Organization (ICCO) projected a significant increase in production for 2024/25, coupled with an increase in U.S. port inventories. This indicates a potential for lower prices moving forward, which can negatively impact companies reliant on cocoa for their goods.

Demand Concerns: Significant cautiousness around demand is evident from the executives of major chocolate companies. The reports of decreased cocoa grindings across major markets signal worries about consumption levels. These trends could lead to reduced revenues for manufacturers dependent on cocoa.

Conclusion: This combination of improving supply alongside decreasing demand creates a challenging environment for cocoa prices. The overall sentiment indicates potential volatility that investors must consider when evaluating stocks of companies engaged in cocoa production or manufacturing chocolate products.

Stocks: HSY MDLZ