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Cocoa Prices Rise Amid Supply Concerns and Demand Warnings

Cocoa prices surged by 4.83% as supply concerns linger. Experts warn high prices may reduce chocolate demand, creating uncertainty in the market.

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AI Rating:   5

Cocoa Market Overview: The recent rebounds in cocoa prices are driven by supply concerns, which come after a notable drop to 3-1/4 month lows. Despite a reported 17% increase in shipments from the Ivory Coast compared to last year, the growth rate has significantly slowed, indicating potential supply issues moving forward.

Supply Dynamics: The low inventories in U.S. ports contribute positively to price stability. The recent recovery in cocoa inventories to a 2-1/2 month high suggests a slight alleviation of concerns. However, Ghana's cocoa harvest forecast has been reduced, signalling a likely reduction in supply.

Demand Challenges: Notably, caution is warranted as both Hershey and Mondelez have indicated that rising cocoa prices impact demand negatively. Mondelez specifically noted signs of reduced chocolate consumption in North America. High cocoa prices could force chocolate producers to increase product prices by as much as 50%, further dampening demand for cocoa.

Grind Reports Insight: The latest quarterly grinding reports reflect a downward trend in cocoa demand, with significant declines reported across Europe, Asia, and North America, indicating that high prices are impacting consumption levels.

Global Cocoa Deficit: The International Cocoa Association has updated its estimates for a substantial cocoa deficit in the upcoming year, adding to bullish sentiment regarding cocoa pricing. Still, the overall picture indicates challenges in both supply and demand that could lead to volatility in cocoa market prices.

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