Cocoa Prices Surge Amid Weak Harvest Signals

Cocoa futures have hit one-month highs as weak crop forecasts emerge from West Africa. Demand concerns from major chocolate producers may temper price spikes, creating a complex scenario for investors. Provided conditions warrant closer attention to price volatility and its implications for companies involved in cocoa production.

Date: 03-04-2025

AI Rating: 5

Cocoa Prices and Harvest Trends
Cocoa prices surged significantly on Wednesday, closing up over 9% on both ICE NY and ICE London markets, indicating strong market reactions to the mid-crop harvest forecasts from West Africa. This increase comes in the context of disappointing crop surveys from the Ivory Coast and Ghana, where farmers have reported limited growth due to late rains. Rabobank forecasts for this mid-crop estimate a yield of 400,000 MT, which is down 9% from last year's 440,000 MT. Such supply constraints could bolster cocoa prices but also raise serious demand concerns.

Demand Concerns from Chocolate Makers
Big names in the chocolate industry, such as Hershey and Mondelez, have recently voiced concerns about declining cocoa consumption driven by rising cocoa prices. Mondelez's CFO highlighted the risk of a potential slowdown in chocolate demand in North America, where higher cocoa prices may lead to increases of up to 50% in chocolate prices, creating a feedback loop that could further deteriorate demand. Similarly, Hershey noted its necessity to reformulate products due to high cocoa costs, indicating serious implications for future sales and margins.

Export Trends and Global Deficits
While there are reports of a year-on-year increase in cocoa exports from the Ivory Coast, the slower pace of shipments overall has raised price support. The International Cocoa Organization (ICCO) has projected a global cocoa deficit of 441,000 MT for the 2023/24 season—the largest deficit in over 60 years—which could continuously pressure market prices upward. The ICCO also forecasts that global cocoa production will fall 13.1% y/y to 4.380 MMT, further straining supply.

Conclusion
In summary, while short-term price spikes may create opportunities for traders, the combination of high prices impacting demand, coupled with weak harvest forecasts from leading producers, suggests potential volatility in cocoa stocks. Investors should closely monitor price movements and demand trends over the coming months to reassess their positions effectively.

Stocks: HSY MDLZ