Skyrocketing Cocoa Prices Persist under Ongoing Trump Tariffs
Cocoa prices witnessed a significant surge on Friday, with both July ICE NY cocoa (CCN25) and July ICE London cocoa #7 (CAN25) closing up 7.48% and 5.48% respectively. The rally can be attributed to fund short-covering that emerged after a federal appeals court granted President Trump a temporary reprieve from a ruling that threatened to curb his tariff agenda. This implies that the cost of cocoa beans in the US will remain higher compared to other regions.
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Over the past week, cocoa prices have faced a downturn, with NY cocoa reaching a 2.5-week low on Thursday, and London cocoa sliding to a 3-week low. The decrease is due to favorable weather in West Africa, which favors cocoa crop growth in the world's leading cocoa-growing region.
The rebound in current cocoa inventories is bearish for prices. Since plummeting to a 21-year low of 1,263,493 bags on January 24, ICE-monitored cocoa inventories held in U.S. ports have rebounded and peaked at an 8.25-month high of 2,201,950 bags on Friday.
Support for cocoa prices persists due to the slowing rate of Ivory Coast cocoa exports, indicating tighter future cocoa supplies. Data from Monday showed that Ivory Coast farmers shipped 1.6 MMT of cocoa to ports this marketing year from October 1 to May 25, marking an increase of 9.6% compared to last year, but a decline from the much larger increase of 35% seen in December.
Last Tuesday, NY cocoa rallied to a 3.75-month nearest-futures high on concerns regarding weather conditions in West Africa. Despite recent rains in the region, nearly a third of Ghana and the Ivory Coast remain under drought, according to the African Flood and Drought Monitor.
Quality concerns about the Ivory Coast's cocoa mid-crop—which is currently being harvested through September—are also supporting cocoa prices. Processors have complained about the crop's quality and have reportedly rejected truckloads of Ivory Coast cocoa beans, with about 5% to 6% of the mid-crop said to be poor quality, compared with 1% during the main crop.
According to Rabobank, the poor quality of the Ivory Coast's mid-crop is partially tied to late-arriving rain in the region that restricted crop growth. The mid-crop is the smaller of the two annual cocoa harvests, which typically starts in April. The average estimate for this year's Ivory Coast mid-crop stands at 400,000 MT, down 9% from last year's 440,000 MT.
Concerns about waning consumer demand for cocoa and cocoa products due to increased tariffs are pressuring prices. On April 10, Barry Callebaut AG, one of the world's largest chocolate makers, lowered its annual sales guidance due to high cocoa prices and tariff uncertainty. Chocolate maker Hershey Co. recently reported a 14% decline in Q1 sales and expects $15-$20 million in tariff costs in Q2, which will further burden chocolate prices and potentially dampen consumer demand. Mondelez International also reported weaker-than-expected Q1 sales and said consumers are trimming back on snack purchases due to economic uncertainty and high chocolate prices.
Cocoa prices have also benefited from recent positive news about global cocoa demand. Q1 North American cocoa grindings dropped 2.5% year-over-year to 110,278 MT, but the decline was less severe than expected. Q1 European cocoa grindings fell 3.7% year-over-year to 353,522 MT, a smaller decrease than anticipated. Q1 Asian cocoa grinding fell 3.4% year-over-year to 213,898 MT, also less than projected.
Smaller cocoa supplies from Ghana—the world's second-biggest cocoa producer—support prices after Cocobod, Ghana's cocoa regulator, reduced its 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.
On February 28, the International Cocoa Organization (ICCO) reported that the 2023/24 global cocoa deficit was -441,000 MT, the largest deficit in over 60 years. ICCO stated that 2023/24 cocoa production fell 13.1% year-over-year to 4.380 MMT. ICCO also reported that the 2023/24 global cocoa stocks/grindings ratio was 27.0%, a 46-year low. For 2024/25, ICCO 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% year-over-year to 4.84 MMT.
The fluctuations in cocoa prices have caught the attention of investors, as they may consider it as a possible tariff-proof asset in the broader finance industry. Given the current state of the cocoa business, understanding the latest trends and forecasts through reliable sources, such as our website, could be beneficial for those interested in this commodity.
