Cocoa Prices Swing with Currency Shifts

Mixed Performance in Cocoa Futures Markets

Cocoa futures prices have shown a mixed performance today, with the September ICE New York cocoa contract (CCU25) rising by +87 points or 1.04%, while the September ICE London cocoa contract (#7, CAU25) fell by -20 points or 0.36%. This divergence is primarily driven by fluctuations in currency exchange rates. The U.S. dollar index (DXY00) dropped to a one-week low, contributing to the upward movement in New York cocoa prices. Conversely, the British pound (^GBPUSD) reached a one-week high, putting downward pressure on London cocoa, which is priced in sterling.

Factors Supporting Cocoa Prices

Several factors are supporting cocoa prices at this time. One key element is the slowdown in the pace of Ivory Coast cocoa exports. According to government data released on Monday, Ivory Coast farmers shipped 1.76 million metric tons (MMT) of cocoa to ports from October 1 to August 3 this marketing year, representing a 6% increase from last year but a significant drop from the 35% rise recorded in December.

Additionally, concerns over dry weather in West Africa are acting as a bullish factor for cocoa prices. The European Centre for Medium-Range Weather Forecasts has reported that rainfall in the Ivory Coast and Ghana remains below the 30-year average. Combined with high temperatures, this could negatively impact cocoa pod development for the main crop harvest, which begins in October.

Quality issues with the Ivory Coast's mid-crop cocoa are also supporting prices. Processors are reporting that approximately 5% to 6% of each truckload of mid-crop cocoa is of poor quality, compared to just 1% during the main crop. Rabobank attributes this decline in quality to late-arriving rain, which limited crop growth. The mid-crop, which is smaller than the main crop, typically starts in April and is expected to yield an average of 400,000 MT this year—down 9% from last year’s 440,000 MT.

Another supportive factor is the reduced cocoa production in Nigeria, the world's fifth-largest producer. The Nigerian Cocoa Association projects a 11% year-over-year decline in 2025/25 cocoa production, falling to 305,000 MT from a projected 344,000 MT in the previous season.

Challenges Facing the Cocoa Market

Despite these positive factors, several challenges are weighing on cocoa prices. Concerns over tepid chocolate demand are bearish for the market. Chocolate makers such as Lindt & Spruengli AG have lowered their margin guidance due to a larger-than-expected drop in first-half chocolate sales. Similarly, Barry Callebaut AG has reduced its sales volume guidance for the second time in three months, citing persistently high cocoa prices. The company reported a 9.5% decline in sales volume for the March-May period, marking the largest quarterly decline in a decade.

Global cocoa demand has weakened, leading to a sell-off in cocoa prices. The European Cocoa Association reported a 7.2% year-over-year decline in Q2 European cocoa grindings to 331,762 MT. Meanwhile, Asian cocoa grindings fell by 16.3% to 176,644 MT—the smallest Q2 figure in eight years. North American cocoa grindings declined by 2.8% to 101,865 MT.

Inventory Levels and Production Outlook

In a negative development, cocoa inventories held in U.S. ports reached a 10.75-month high of 2,368,141 bags on July 22. This suggests an oversupply in the market, which could further pressure prices.

Ghana, the world's second-largest cocoa producer, is expected to see higher cocoa production in the 2025/26 season. The Ghana Cocoa Board projects an 8.3% year-over-year increase in the 2025/26 crop, reaching 650,000 MT from 600,000 MT in the previous season.

The International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit to -494,000 MT, the largest deficit in over 60 years. However, ICCO forecasts a global surplus of 142,000 MT for 2024/25, marking the first surplus in four years. The organization also expects a 7.8% year-over-year increase in global cocoa production to 4.84 MMT.

Conclusion

As the cocoa market continues to navigate both supportive and challenging factors, traders and investors remain closely watching supply dynamics, weather conditions, and global demand trends. With the upcoming harvest seasons and potential shifts in market sentiment, the outlook for cocoa prices remains uncertain.