Cocoa navigates between weak demand and supply

The cocoa market is still dominated by two forces: a low supply and weak demand. Where weak demand caused a sharp drop in the exchanges two weeks ago, the supply has been dictating prices in recent weeks. Cocoa prices in the United States and Europe continue to diverge significantly. On Tuesday, July 29, cocoa in the United States was 12.9% more expensive than in London. After a significant decline in the past two weeks, a clear correction took place this week. On July 17, the price in London reached its lowest point since March 2024, at $6,780.39 per ton. The same applied to New York, where the price was $7,800 per ton. By Monday, June 28, the price in New York had risen to $7,493.29, an increase of 10.5%. The price later even rose to $8,518, a 9.2% increase. The recovery is a result of supply concerns. Between October 1 and July 27, cocoa farmers in the world's largest producer, Ivory Coast, harvested 1.75 million tons of cocoa. This is a 6.1% increase from last year, but the result is once again considered disappointing. In December, the annual supply increase in the country was still 35%. There is now an expectation that the supply will further decrease. The weather outlook for the region is unfavorable; according to the latest forecasts, rainfall is expected to drop below the thirty-year average in the coming weeks. The International Cocoa Organization (ICCO) has revised its estimate for the global cocoa deficit in the 2023/24 season to 494,000 tons - the largest deficit in over sixty years. This historical contraction is a result of a global production decrease of 13.1% compared to the previous year. Looking ahead to 2024/25, the ICCO expects the situation to improve. A global cocoa surplus of 142,000 tons is predicted, with production expected to increase by 7.8% to 4.84 million tons. Demand significantly decreases Currently, high prices continue to take their toll. Lindt & Sprüngli AG has lowered its profit expectations, and Barry Callebaut has reduced its sales forecast. The latter reported a 9.5% decline in sales volumes for the period from March to May. According to the European Cocoa Association, cocoa processing in Europe in the second quarter of 2025 decreased by 7.2% compared to a year earlier, totaling 331,762 tons. This is a sharper decline than anticipated. Processing in Asia decreased by 16.3% on an annual basis, the lowest level for a second quarter in eight years. North America also experienced a decline, with a 2.8% decrease compared to the second quarter of last year. The low demand is also reflected in the stocks. In the United States, port stocks reached the highest level in over ten months, with over 2,368,000 bags stored in the ports. This explains why prices declined to their lowest point in over a year up until two weeks ago. There are clear signals that the situation in Europe is not much different. Production delays among European cocoa processors have deepened further in the second quarter of 2025. This is reported by Bloomberg based on a survey of seven leading cocoa processors and traders. The amount of cocoa beans processed into cocoa butter and powder is estimated to have decreased by nearly 5% compared to the same period in 2024. This places processing activity at its lowest level since the COVID-19 pandemic, marking a fourth consecutive quarter of production decline.