Cocoa Prices Face Pressure Amid Slowing Demand and Production

Cocoa prices are sharply lower due to slowing demand and adverse weather conditions. This downturn raises concerns for chocolate makers like Hershey and Mondelez, which may affect their stock performance in the short term.

Date: 11-02-2025

AI Rating: 5

**Cocoa Prices and Market Outlook**

The report highlights a significant decline in cocoa prices, with March ICE NY cocoa down by -3.30% and London cocoa by -1.48%. The pressure on cocoa prices is primarily due to decreasing demand, as demonstrated by recent statements from major chocolate manufacturers.

**Demand Concerns**

Hershey's announcement that high cocoa prices have led them to reformulate recipes indicates a potential shift in consumer product offerings. Similarly, Mondelez International's CFO noted a decrease in cocoa consumption in North America. The Q4 data from the European Cocoa Association shows a -5.3% year-over-year drop in European cocoa grindings, pointing to weak demand trends.

**Production and Inventory Issues**

While there are indications of a cocoa supply crunch, as seen with the International Cocoa Organization's report estimating a significant global cocoa deficit, the favorable weather conditions in West Africa have improved cocoa tree development. This means that while current prices are pressured, future production potential remains a pivotal factor.

**Stock Prices Implications**

With cocoa-related companies like Hershey seeking large cocoa purchases due to tight supplies, it reflects their anticipation of future price increases. Cocoa's current bearish trends may lead to volatility in the stock prices of these companies as they react to shifting supply and demand dynamics.

Companies producing cocoa-based products may face challenges from high ingredient costs and changing demand patterns, which could adversely impact their profitability and stock valuations.

Stocks: HSY MDLZ