Cocoa Prices Fall on the Outlook for Higher Cocoa Output in Ghana

September ICE NY cocoa (CCU25) Wednesday closed down -92 (-1.11%), and September ICE London cocoa #7 (CAU25) closed down -125 (-2.20%).

Cocoa costs on Wednesday prolonged this week’s selloff, with NY cocoa posting a 1-week low and London cocoa posting a 1-1/2 week low.   Cocoa costs are weighed down by detrimental carryover from Tuesday, when the Ghana Cocoa Board projected the 2025/26 Ghana cocoa crop would enhance by +8.3% y/y to 650,000 from 600,000 MT in 2024/25.  Ghana is the world’s second-largest cocoa producer.  

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The rebound in present cocoa inventories can also be bearish for costs.  Since falling to a 21-year low of 1,263,493 luggage on January 24, ICE-monitored cocoa inventories held in US ports climbed to a 9-3/4 month excessive of two,363,861 luggage on June 18.  

Cocoa costs have assist from issues about tighter cocoa provides from the Ivory Coast.  Monday’s authorities knowledge confirmed that Ivory Coast farmers shipped 1.698 MMT of cocoa to ports this advertising 12 months from October 1 to June 29, up +6.8% from final 12 months however down from the a lot bigger +35% enhance seen in December.  There are stories that heavy rain within the Ivory Coast is holding cocoa growers off their farms and is disrupting the continued mid-crop cocoa harvest.

Indicators of smaller cocoa exports are supportive of cocoa costs, following final Wednesday’s information that Nigerian Could cocoa exports fell by -29% y/y to 14,110 MT.  Nigeria is the world’s fourth-largest exporter of cocoa.

In late Could, NY cocoa rallied to a 5-month nearest-futures excessive on issues about climate in West Africa.  Regardless of the latest rain in West Africa, drought nonetheless covers greater than a 3rd of Ghana and the Ivory Coast, in response to the African Flood and Drought Monitor.

Cocoa costs even have assist on account of high quality issues relating to the Ivory Coast’s mid-crop cocoa, which is at the moment being harvested via September.  Cocoa processors are complaining in regards to the high quality of the crop and have rejected truckloads of Ivory Coast cocoa beans.  Processors reported that about 5% to six% of the mid-crop cocoa in every truckload is of poor high quality, in contrast with 1% throughout the principle crop.  In response to Rabobank, the poor high quality of the Ivory Coast’s mid-crop is partly attributed to late-arriving rain within the area, which restricted crop progress.  The mid-crop is the smaller of the 2 annual cocoa harvests, which usually begins in April.  The common estimate for this 12 months’s Ivory Coast mid-crop is 400,000 MT, down -9% from final 12 months’s 440,000 MT.

Concern about client demand for cocoa and cocoa merchandise is bearish for cocoa, pushed by fears that tariffs will exacerbate already excessive cocoa costs.  On April 10, Barry Callebaut AG, one of many world’s largest chocolate makers, diminished its annual gross sales steerage on account of excessive cocoa costs and tariff uncertainty.  Additionally, chocolate maker Hershey Co. not too long ago reported that Q1 gross sales fell by 14% and stated it anticipated $15-$20 million in tariff prices in Q2, which can increase chocolate costs and additional weigh on client demand.  Mondelez Worldwide reported weaker-than-expected Q1 gross sales, stating that customers are slicing again on snack purchases on account of financial uncertainty and excessive chocolate costs.  

Weaker demand from cocoa processors was seen in Q1.  Q1 North American cocoa grindings fell -2.5% y/y to 110,278 MT.  Q1 European cocoa grindings fell -3.7% y/y to 353,522 MT.  Q1 Asian cocoa grinding fell -3.4% y/y to 213,898 MT.

On Could 30, the Worldwide Cocoa Group (ICCO) revised its 2023/24 world cocoa deficit to -494,000 MT from a February estimate of -441,000 MT, the most important deficit in over 60 years.  ICCO stated 2023/24 cocoa manufacturing fell -13.1% y/y to 4.380 MMT.  ICCO stated the 2023/24 world cocoa shares/grindings ratio fell to a 46-year low of 27.0%.  Waiting for 2024/25, ICCO on February 28 forecasted a world cocoa surplus of 142,000 MT for 2024/25, the primary surplus in 4 years.  ICCO additionally projected that 2024/25 world cocoa manufacturing will rise +7.8% y/y to 4.84 MMT. 

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