Cocoa Prices Drop Amid Demand Concerns and Production Estimates

Cocoa prices have fallen significantly as Mondelez warns of demand slowdown in North America. Meanwhile, beneficial rain in West Africa is supporting crop development, leading to a complex market environment for cocoa investors.

Date: 06-02-2025

AI Rating: 5

Earnings Concerns
Mondelez International has indicated a potential slowdown in chocolate demand, especially in North America, which could negatively impact revenue for cocoa suppliers and chocolate manufacturers.

Production Factors
The recent rains in West Africa may improve cocoa crop conditions, specifically benefiting farmers in Ivory Coast and Ghana. However, adverse effects from the Harmattan winds could negatively influence yields.

Cocoa Deficit Projections
Concerns about a widening global cocoa deficit, with recent estimates suggesting a significant shortfall for the cocoa season, are bullish for cocoa prices. The International Cocoa Organization reported a decline in global cocoa stockpiles and raised its deficit estimate to -478,000 MT, the largest in over 60 years.

Market Support Dynamics
Support for cocoa prices also comes from a decrease in ICE-monitored cocoa inventories to a 21-year low, signaling tight global supplies. Additionally, Hershey's proposal for large cocoa purchases indicates strong demand potential despite existing price pressures.

Negative Demand Indicators
On the bearish side, there are reports of decreased cocoa grindings in Europe, Asia, and North America, suggesting that high cocoa prices may be leading to demand destruction. Cacao exports from Nigeria have also surged, adding further pressure on prices.

Production Settings
Conflicting reports regarding cocoa production estimates from Côte d'Ivoire and Ghana showcase the volatility in expected cocoa supply. The slight increase in Ivorian production forecasts contrasts with cuts in Ghana’s forecasts, indicating a nuanced view of global supply trends.

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