Cocoa prices recover as worldwide demand proves stronger than anticipated

Cocoa Futures Rise on Smaller Decline in Asian Processing

March ICE NY cocoa (CCH26) climbed by 104 points (2.09%) today, while March ICE London cocoa #7 (CAH26) advanced 67 points (1.84%).

The upward movement in cocoa prices is being fueled by a less severe drop in Asian cocoa grindings than anticipated, prompting traders to cover short positions. According to the Cocoa Association of Asia, fourth-quarter cocoa processing in Asia decreased by 4.8% year-over-year to 197,022 metric tons, which was a milder decline than the expected 12%. Meanwhile, North American cocoa grindings for the same period edged up 0.3% to 103,117 metric tons, slightly surpassing forecasts that called for no change.

Recent Market Developments

On Thursday, New York cocoa futures dropped to their lowest level in nearly two years, while London cocoa reached a 1.5-month low, reflecting concerns about weak global demand. The European Cocoa Association reported that fourth-quarter cocoa processing in Europe fell by 8.3% year-over-year to 304,470 metric tons, a sharper decline than the expected 2.9% and the lowest Q4 figure in 12 years.

Favorable weather in West Africa is also putting downward pressure on cocoa prices. Tropical General Investments Group noted that improved growing conditions in the region are likely to result in a larger and healthier cocoa harvest in Ivory Coast and Ghana for February and March, with farmers observing better pod quality compared to last year.

Mondelez, a major chocolate producer, recently indicated that the cocoa pod count in West Africa is currently 7% above the five-year average and significantly higher than last year’s crop. The main harvest in Ivory Coast has commenced, and local farmers are optimistic about the crop’s quality.

Supply Factors Supporting Cocoa Prices

Signs of reduced cocoa shipments from Ivory Coast are lending support to prices. Data from Monday shows that farmers in Ivory Coast shipped 1.13 million metric tons of cocoa to ports since the start of the new marketing year on October 1 through January 11, a 2.6% decrease from the 1.16 million metric tons shipped during the same period last year. Ivory Coast remains the world’s top cocoa producer.

Lower cocoa inventories are also contributing to a bullish outlook. ICE-monitored cocoa stocks in U.S. ports dropped to a 10-month low of 1,626,105 bags on December 26, though they have since rebounded to a 1.25-month high of 1,680,417 bags as of Thursday.

The global supply outlook for cocoa continues to tighten. On November 28, the International Cocoa Organization (ICCO) reduced its estimate for the 2024/25 global cocoa surplus to 49,000 metric tons, down from the previous forecast of 142,000 metric tons. The ICCO also revised its 2024/25 global cocoa production estimate to 4.69 million metric tons, compared to the earlier projection of 4.84 million metric tons. Additionally, Rabobank recently lowered its 2025/26 global cocoa surplus estimate to 250,000 metric tons from a previous forecast of 328,000 metric tons.

Additional Insights

In late November, cocoa prices faced downward pressure after the European Parliament approved a one-year postponement of the deforestation regulation, which is expected to keep cocoa supplies abundant. The EU’s EUDR regulation targets deforestation linked to imports of commodities such as soybeans and cocoa. The delay allows continued imports from regions in Africa, Indonesia, and South America where deforestation is ongoing.

On the supply side, Nigeria, the world’s fifth-largest cocoa producer, is expected to see a decline in output. The Cocoa Association of Nigeria forecasts that cocoa production for the 2025/26 season will drop by 11% year-over-year to 305,000 metric tons, down from an estimated 344,000 metric tons for 2024/25. Meanwhile, Nigeria’s cocoa exports in September remained steady at 14,511 metric tons compared to the previous year.

On May 30, the ICCO updated its estimate for the 2023/24 global cocoa deficit to 494,000 metric tons, marking the largest shortfall in over six decades. The organization reported that cocoa production for 2023/24 declined by 12.9% year-over-year to 4.368 million metric tons. In December, the ICCO projected a global cocoa surplus of 49,000 metric tons for 2024/25, the first surplus in four years, and noted that global production for 2024/25 increased by 7.4% year-over-year to 4.69 million metric tons.