Cocoa Prices Climb as the Dollar Falls and Ivory Coast Cocoa Exports Slow

Globe and Mail

a day ago

July ICE NY cocoa (CCN25) Thursday closed up +128 (+1.29%), and July ICE London cocoa #7 (CAN25) closed up +65 (+0.99%).
Cocoa prices settled higher on Thursday, with NY cocoa posting a 1-1/2 week high and London cocoa posting a 1-week high. Thursday's fall in the dollar index (DXY00) to a 6-week low prompted short covering in cocoa futures. Gains in London cocoa were limited on Thursday after the British pound (^GBPUSD) rallied to a 3-1/4-year high, undercutting cocoa that is priced in terms of sterling.
Cocoa also has support due to the slowing pace of Ivory Coast cocoa exports, signaling tighter future cocoa supplies. Monday's government data showed that Ivory Coast farmers shipped 1.6 MMT of cocoa to ports this marketing year from October 1 to June 1, up +6.7% from last year but down from the much larger +35% increase seen in December.
Last month, NY cocoa rallied to a 4-month nearest-futures high on concerns about weather in West Africa. Despite the recent rains in West Africa, drought still covers more than a third of Ghana and the Ivory Coast, according to the African Flood and Drought Monitor.
Cocoa prices also have support on quality concerns regarding the Ivory Coast cocoa mid-crop, which is currently being harvested through September. Cocoa processors are complaining about the crop's quality and have rejected truckloads of Ivory Coast cocoa beans. Processors said about 5% to 6% of the mid-crop cocoa in each truckload is poor quality, compared with 1% during the main crop.
According to Rabobank, the poor quality of the Ivory Coast's mid-crop is partly tied to late-arriving rain in the region that limited crop growth. The mid-crop is the smaller of two annual cocoa harvests, which typically starts in April. The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down -9% from last year's 440,000 MT.
The rebound in current cocoa inventories is bearish for prices. Since falling to a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa inventories held in US ports have rebounded and climbed to an 8-1/2 month high of 2,232,584 bags Thursday.
Concern that consumer demand for cocoa and cocoa products will wane is bearish for cocoa on fears that tariffs will boost already-high cocoa prices. On April 10, Barry Callebaut AG, one of the world's biggest chocolate makers, cut its annual sales guidance in the face of high cocoa prices and tariff uncertainty. Also, chocolate maker Hershey Co. recently reported that Q1 sales fell by 14% and said it anticipated $15-$20 million in tariff costs in Q2, which will boost chocolate prices and further weigh on consumer demand. In addition, Mondelez International reported weaker-than-expected Q1 sales and said consumers are cutting back on snack purchases due to economic uncertainty and high chocolate prices.
Cocoa prices also have a positive carryover from recent news that showed better-than-expected global cocoa demand. Q1 North American cocoa grindings fell -2.5% y/y to 110,278 MT, better than expectations of at least a -5% y/y fall. Also, Q1 European cocoa grindings fell -3.7% y/y to 353,522 MT, a smaller decline than expectations for a -5% y/y drop. In addition, Q1 Asian cocoa grinding fell -3.4% y/y to 213,898 MT, a smaller decline than expectations for a fall of at least -5% y/y.
Smaller cocoa supplies from Ghana, the world's second-biggest cocoa producer, are supportive for prices after Cocobod, Ghana's cocoa regulator, cut its Ghana 2024/25 cocoa harvest forecast in December for the second time this season to 617,500 MT, down -5% from an August estimate of 650,000 MT.
Last Friday, The International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit to -494,000 MT from a February estimate of -441,000 MT, the largest deficit in over 60 years. ICCO said 2023/24 cocoa production fell -13.1% y/y to 4.380 MMT. ICCO said the 2023/24 global cocoa stocks/grindings ratio was 27.0%, a 46-year low. Looking ahead to 2024/25, ICCO on February 28 forecasted a global cocoa surplus of 142,000 MT for 2024/25, the first surplus in 4 years. ICCO also projected that 2024/25 global cocoa production will rise +7.8% y/y to 4.84 MMT.