Cocoa Prices Retreat as Global Demand Weakens

December ICE NY cocoa (CCZ25) on Friday closed down -96 (-1.60%), and December ICE London cocoa #7 (CAZ25) closed down -92 (-2.19%).

Cocoa costs fell from 1-week highs on Friday and settled sharply decrease on indicators of weak international cocoa demand.  The Cocoa Affiliation of Asia reported that Q3 Asia cocoa grindings fell -17% y/y to 183,413, the smallest grindings for a Q3 in 9 years.  On Thursday, the European Cocoa Affiliation reported that Q3 European cocoa grindings fell -4.8% y/y to 337,353 MT, the bottom for a 3rd quarter in 10 years.  Nonetheless, the Nationwide Confectioners Affiliation reported that Q3 North American coca grindings rose +3.2% y/y to 112,784 MT.  The bullish points of the Q3 North American grindings report had been negated, nevertheless, after the addition of latest reporting corporations to the report skewed the information.

Don’t Miss a Day: From crude oil to espresso, enroll free for Barchart’s best-in-class commodity evaluation.

On Monday, cocoa costs prolonged their two-month-long decline, with NY cocoa posting a 20-month nearest-futures low and London cocoa posting a 20.5-month nearest-futures low.  Cocoa costs stay beneath stress because of the outlook for ample provides amid weak demand.

The governments of the Ivory Coast and Ghana have not too long ago elevated the quantity they pay farmers for his or her cocoa beans, which is anticipated to spice up gross sales and cocoa provides.  

Cocoa costs have additionally been beneath stress over the previous two months amid fears that top cocoa costs and tariffs might dampen chocolate demand.  North American gross sales quantity of chocolate sweet was down greater than -21% within the 13 weeks ending September 7, in comparison with the identical interval final 12 months, in line with information from analysis agency Circana.

The outlook for an improved cocoa crop within the Ivory Coast this 12 months can be bearish for costs.  Chocolate maker Mondelez not too long ago stated that the most recent cocoa pod rely in West Africa is 7% above the five-year common and “materially increased” than final 12 months’s crop.  The harvest of the Ivory Coast’s fundamental crop has simply begun, and farmers are optimistic in regards to the high quality of the crop.

Expectations of ample international cocoa provides are hammering cocoa costs.  Cocoa deliveries in Ghana have surged, weighing on costs.  Cocoa arrivals to ports in Ghana within the 4 weeks ending September 4 reached 50,440 MT in comparison with about 11,000 MT delivered in the identical interval in 2024.  Ghana is the world’s second-largest producer of cocoa.

Tighter cocoa inventories are supportive for costs after ICE-monitored cocoa inventories held in US ports fell to a 6.25-month low of 1,870,004 baggage on Friday.

An extreme quick place by commodity funds might exacerbate any short-covering rally, as funds boosted their net-short positions in London cocoa by 2,286 to 13,057 within the week ended October 14, the most important quick place in additional than three years, in line with the weekly Dedication of Merchants (COT) information launched on Friday.  The US authorities shutdown has delayed the discharge of figures for NY cocoa positioning.  

Cocoa has some help from a slowdown within the tempo of cocoa exports from the Ivory Coast, the world’s largest cocoa producer.  Monday’s authorities information confirmed that Ivory Coast farmers shipped 48,753 MT of cocoa to ports this advertising and marketing 12 months from October 1-11, in contrast with 100,264 MT in the identical interval a 12 months in the past.  

High quality issues concerning the Ivory Coast’s mid-crop cocoa are supportive of costs.  In accordance with 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 and ends in September.  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.

One other supportive issue for cocoa is the smaller cocoa manufacturing in Nigeria, the world’s fifth-largest cocoa producer.  Nigeria’s Cocoa Affiliation tasks Nigeria’s 2025/26 cocoa manufacturing will fall -11% y/y to 305,000 MT from a projected 344,000 MT for the 2024/25 crop 12 months.  In associated information, Nigeria reported that its August cocoa exports rose +15% y/y to 17,239 MT.  

On Could 30, the Worldwide Cocoa Group (ICCO) revised its 2023/24 international 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 by 13.1% y/y to 4.380 MMT.  ICCO acknowledged that the 2023/24 international cocoa stocks-to-grindings ratio declined to a 46-year low of 27.0%.  Looking forward to 2024/25, ICCO forecasted a worldwide cocoa surplus of 142,000 MT on February 28, 2024, marking the primary surplus in 4 years.  ICCO additionally projected that 2024/25 international cocoa manufacturing will rise +7.8% y/y to 4.84 MMT. 

On the date of publication,

Wealthy Asplund

didn’t have (both straight or not directly) positions in any of the securities talked about on this article. All info and information on this article is solely for informational functions.

For extra info please view the Barchart Disclosure Coverage

right here.

Extra information from Barchart

The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.