Cocoa Prices Rise Amid Concerns Over Demand and Supply

Cocoa prices are showing a rise after hitting 3-1/2 month lows. However, indicators such as demand concerns and production forecasts suggest potential volatility ahead.

Date: 08-03-2025

AI Rating: 5

Cocoa Market Overview

The report details that cocoa prices have been recovering from recent lows, with May contracts for ICE NY cocoa and ICE London cocoa showing gains of 0.83% and 0.92%, respectively. This upward trend is partly attributed to a drop in the dollar index allowing for short covering. However, cocoa has faced significant downward pressures recently due to improving supply forecasts.

Supply Insights

The International Cocoa Organization (ICCO) predicts a global cocoa surplus for 2024/25 of 142,000 MT, the first surplus in four years, along with a 7.8% year-on-year rise in production. Moreover, Nigeria’s cocoa exports saw a substantial increase of 27% year-on-year, highlighting the growing availability of cocoa on the market.

Demand Concerns

Demand concerns persist as leaders from chocolate manufacturing companies such as Hershey and Mondelez have reported that high cocoa costs are reducing consumption. Mondelez CFO Zarmella pointed out a reduction in cocoa consumption in North America, and potential price increases of chocolate could further suppress demand. The report notes a substantial decrease in cocoa grindings during the last quarter across key markets, indicating weakening demand.

Supportive Factors for Prices

Meanwhile, there are factors that could support cocoa prices, including tight inventories and declining exports from Ghana. ICE-monitored cocoa inventories are currently at a 21-year low, although they recently showed some recovery, indicating tight supply. Additionally, the ICCO's report shows a significant cocoa deficit of 441,000 MT for the 2023/24 season, further complicating the market outlook.

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