Cocoa Prices Hit 2-Month Lows Amid Demand Concerns

Cocoa prices are falling, hitting two-month lows as demand slows, affecting companies like Hershey and Mondelez. With cocoa grindings declining globally, investors should be cautious.

Date: 08-02-2025

AI Rating: 5

Current Trends in Cocoa Prices
Recent data indicates that cocoa prices have sharply decreased, reaching two-month lows. The downward trend is primarily attributed to a significant decline in global cocoa demand, particularly highlighted by statements from major chocolate manufacturers, Hershey and Mondelez International. These companies are adjusting their formulations due to elevated cocoa prices.

Global Cocoa Grindings
Reports show that European cocoa grindings have experienced a substantial drop of -5.3% year-over-year, while Asian cocoa grindings have fallen -0.5% year-over-year—a notable concern since both figures are at their lowest levels in over four years. North American grindings also decreased by -1.2% year-over-year, hinting at weakening demand in a key market.

Environmental Factors
Weather conditions appear to be a mixed bag for cocoa prices. Beneficial rains in West Africa are supporting crop development, yet the impact of the Harmattan winds is causing concern about crop health. Reports of adverse effects on cocoa trees in regions like Ghana and Ivory Coast could lead to future supply issues.

Inventory Levels and Shortages
Despite rising harvest estimates from certain areas, global cocoa inventories remain tight, enhancing price support. The International Cocoa Organization recently reported a reduced stockpile and a significant global cocoa deficit, expected to be the largest in over sixty years. This imbalance could continue influencing cocoa prices upward if consumption regains strength.

Production Forecasts
Ghana’s production forecast has been revised downward, signaling potential supply constraints amid an already bullish outlook due to deficits. Conversely, an increase in production estimates for Ivory Coast could add to the market's volatility.

Overall Impact
For investors, these trends suggest caution as cocoa producers like Hershey and Mondelez may face squeezed margins and demand challenges. The dual nature of supply constraints and demand reductions mandates close monitoring of market conditions.

Stocks: HSY MDLZ