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Cocoa Prices Mixed Amid Changes in Supply and Demand Dynamics

Cocoa prices are experiencing fluctuations as supply increases while demand concerns grow. The ICCO projects a surplus for 2024/25, contributing to price pressure.

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Cocoa Price Movement
On Monday, cocoa prices settled mixed, with NY cocoa closing down 0.51% and London cocoa up 0.26%. The International Cocoa Organization (ICCO) has forecast a global cocoa surplus of 142,000 MT for the 2024/25 season, the first surplus in four years. The expected increase in production could impact future cocoa pricing.

Supply Dynamics
The ICCO has reported that global cocoa production is projected to rise by 7.8% year-on-year to 4.84 million metric tons. Further, ICE-monitored cocoa inventories in US ports have experienced a rebound, growing to a 4-1/4 month high of 1,737,320 bags. This increase in supply could further pressure cocoa prices downward.

Demand Concerns
Conversely, chocolate producers like Hershey and Mondelez have raised concerns about declining cocoa demand due to high prices. Mondelez noted a potential slowdown in chocolate demand, particularly in North America, where cocoa consumption is reportedly decreasing. Moreover, they have warned about impending chocolate price increases, which may negatively influence demand.

Recent data shows a decline in Q4 cocoa grindings across several key markets, such as a -5.3% year-on-year decrease in Europe and a -1.2% decline in North America. These figures further highlight the demand erosion in cocoa consumption.

Global Production Shortages
On the flip side, Ghana's reduced cocoa harvest forecast could provide some support for cocoa prices. With Cocobod cutting Ghana's cocoa harvest forecast for 2024/25 by 5%, tighter supplies from significant producers may help alleviate some downward pressure on prices coming from increased global production. Nonetheless, the overall outlook suggests a notable cocoa deficit of -441,000 MT for 2023/24, marking the largest deficit in over 60 years.
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