Cocoa Prices Plunge on Malaysia Demand Slump and Ghana’s Big Harvest
Cocoa Prices Plummet Amidst Demand Concerns and Oversupply Fears
The world of cocoa trading took a significant hit yesterday, with both September ICE New York Cocoa (CCU25) and September ICE London Cocoa #7 (CAU25) experiencing notable declines. CCU25 dropped by $449 (-5.42%), while CAU25 fell by $153 (-2.85%). These drops are being attributed to concerns over demand and the looming specter of oversupply in the market.
One key factor contributing to these fluctuations is the decline in cocoa bean processing in Q2, revealed earlier this week by the Malaysian Cocoa Board and Cocoa Manufacturers Group. A dramatic 22% year-over-year reduction has left many within the industry questioning whether global demand can offset the impending surge in supply from top producers like Ghana. The projections for a surplus of 142,000 MT in the 2024/25 crop season, announced by the International Cocoa Organization (ICCO) back in February, have clearly lost their appeal as cocoa futures plummet.
The Quarterly Q2 Cocoa Grinding Reports: A Crucial Turning Point
As the market anticipates Thursday’s quarterly q2 cocoa grinding reports for a more detailed picture of current consumption trends, fears are mounting that weak grindings data may drive prices even lower. In Q1, North American and European grindings dropped by 2.5% and 3.7%, respectively, while Asian grindings fell 3.4%. If historical patterns hold true, it might indeed signal a decline in cocoa usage in key regions.
In the face of such an uncertain market climate, many companies involved in the supply chain are adapting to maintain profitability despite rising competition for limited consumer funds amidst escalating global economic uncertainty. However, some have managed to find opportunities within this volatility – their capacity to adapt playing a key role in safeguarding profitability at what has already become an unstable time.
Ghana’s Bigger Cocoa Crop
It is worth noting that increased cocoa supplies from Ghana are bearish for prices – the country being the world’s second largest producer after Ivory Coast. Back on July 1, Ghana Cocoa Board projected its 2025/26 crop would surge by an impressive +8.3% y/y to a colossal 650k MT from 600k MT in 2024/25. Bigger crops would lead to excess supply over demand creating downward pressure to prices.
In this light it’s also worth mentioning that on June 18 the port inventories held in US, registered their highest level for at least one decade with +2,363,861 bags of dry cocoa products. While inventorie levels are modestly lower as of this past Monday at +2,338,724 bags – this trend should only continue to bearish the market pricing.
Rabobank Expects a Poor Quality Mid-Crop Cocoa
The quality of Ivory Coast’s mid-crop cocoa harvest is receiving growing attention due primarily to late-arriving rain in certain areas being described as inadequate. Rabobank believes that 5% to 6% of mid-crop cocoa within every truckload examined would be considered poor quality while normally not exceeding 1% during main crop processing. According to average projections for this year’s midcrop estimate stands at 400,000 MT – down nine percent from last year – adding a yet another concerning component.
Chocolate Manufacturers Reduce Sales Volume Guidance Again
Concer about consumer demand for chocolate products has reached alarming levels amidst fears that tariffs might even further push up cocoa prices and exacerbate economic uncertainty affecting consumer purchase decisions. Chocolate producers like Mondelez, Hershey are feeling this heat more than ever with their recent sales reports revealing a dire situation affecting every corner of the industry.
Record Cocoa Deficit for over 60 Years
Mondelez International reported weaker-than-expected Q1 sales stating that consumers cut back on snack purchases due to economic uncertainty and high chocolate prices. Similar trends can be seen in many chocolate related industries struggling amidst economic uncertainties affecting consumer choices today which may become even more pronounced once tariffs exacerbate cocoa prices.
Looking ahead, the 2024/25 global market still harbors promise for cocoa producers despite record deficit and global cocoa stocks and grindings ratio falling to a historic 46-year low. Despite such challenges producers continue to find new opportunities in adapting strategies designed not merely to stabilize their own markets but safeguard profitability within this environment of growing supply over projected consumer demand.
Rich Asplund’s Uninvolvement
On the date of publication, Rich Asplund did not have (either directly or indirectly) a position in any securities mentioned.
