Cocoa Prices Plummet Amid Supply Surplus Concerns

Cocoa prices tumbled sharply as supply outlook improves. Analysts warn of potential demand slowdown as high cocoa costs affect major chocolate makers like Hershey and Mondelez. The market is reacting negatively to these economic signals.

Date: 22-03-2025

AI Rating: 5

Cocoa Price Trends: Cocoa prices have fallen significantly, with May ICE NY cocoa closing down -3.79% and May ICE London cocoa down -2.60%. This decline points to a bearish market influenced by increasing supply. The International Cocoa Organization's forecast of a global cocoa surplus of 142,000 MT for 2024/25 marks the first surplus in 4 years.

Improving Inventory: Reports indicate a rebound in cocoa inventories, which increased to a 4-1/2 month high of 1,784,552 bags, compared to a low of 1,263,493 bags earlier this year. This recovery is another bearish factor affecting prices.

Supply Factors: Nigeria's cocoa exports surged by +27% y/y, contributing to supply increases, though concerns remain about the smaller upcoming mid-crop from the Ivory Coast. Current estimates show this crop to be -9% below last year's levels, which may limit downside risks on prices.

Demand Concerns: Executives from major companies like Hershey and Mondelez have expressed that high cocoa prices are resulting in decreased demand. Specifically, Mondelez reported a potential slowdown in cocoa consumption in markets like North America. Additionally, reports of lower cocoa grindings in Q4 across Europe and Asia indicate a bearish outlook on demand.

Production Outlook: The ICCO forecasts a significant global cocoa deficit of -441,000 MT for the 2023/24 year due to production reductions. This, combined with a persistently low cocoa stocks/grindings ratio (27.0%), highlights the challenges facing the market amidst fluctuating supply and demand dynamics.

Stocks: HSY MDLZ