Cocoa Prices Plunge Amid Demand Concerns and Supply Issues

Cocoa prices declined sharply, hitting new lows amid demand worries. As chocolate giants like Hershey and Mondelez cite decreased demand due to high prices, market stability remains in question.

Date: 22-02-2025

AI Rating: 4

Market Impact of Cocoa Price Decline
Cocoa prices have faced significant pressure, as evidenced by the drastic declines in both NY and London cocoa futures. The noted drop of 11.33% for NY cocoa and 7.64% for London cocoa signals substantial shifts in market sentiment driven by demand concerns.
Demand Concerns
Executives from major chocolate manufacturers, specifically Hershey and Mondelez, have indicated that elevated cocoa prices are impacting their sales. Mondelez specifically noted a potential slowdown in chocolate demand, particularly in North America, where consumption is reportedly decreasing. This sentiment, coupled with the possibility of price hikes of up to 50% on chocolate products, is likely to deter consumers, further suppressing demand.
Cocoa Grindings and Inventory Levels
The analysis shows Q4 cocoa grinding statistics reflected a decline, with European cocoa grindings down 5.3% year-on-year, and Asian and North American volumes also falling. This suggests a tangible link between cocoa prices and chocolate production, which likely translates into reduced sales for chocolate companies, thus affecting their respective stock performances.
Furthermore, while initial shipping reports from the Ivory Coast showed increased exports, the growth rate has since declined, steering potential concerns around supply stability. However, tighter global inventories present a counterbalance, suggesting that while immediate demand-related issues exist, underlying supply constraints could support prices in the long run.
Long-term Cocoa Outlook
The International Cocoa Association's report on increasing deficit predictions highlights an expected global cocoa output reduction and further tightening stocks. This long-term view could influence pricing dynamics in the cocoa market, thereby affecting the related stocks of companies like Hershey and Mondelez in the months to come.

Stocks: HSY MDLZ