Cocoa Prices Retreat as Rains Arrive in West Africa

Group 1: Cocoa Price Trends - Cocoa prices are currently down, with December ICE NY cocoa down -3.73% and December ICE London cocoa down -2.07% due to improved weather conditions in West Africa, which may enhance cocoa output [1] - Cocoa prices fell to 1.75-month lows amid expectations of growing supplies and weakening demand, influenced by high cocoa prices and tariffs affecting chocolate demand [4] - The International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit to -494,000 MT, the largest deficit in over 60 years, while forecasting a global cocoa surplus of 142,000 MT for 2024/25 [11] Group 2: Supply and Production Factors - The slowdown in cocoa exports from the Ivory Coast is bullish for prices, with shipments reported at 1.82 MMT, up +5.8% from last year but down from a larger +35% increase seen in December [3] - Quality concerns regarding the Ivory Coast's mid-crop cocoa are supportive of prices, with an estimated mid-crop of 400,000 MT, down -9% from last year's 440,000 MT [7] - Nigeria's Cocoa Association projects a decline in cocoa production by -11% y/y to 305,000 MT for the 2025/26 crop year, which may support prices [8] Group 3: Demand Dynamics - Weakness in global cocoa demand has been a bearish factor, with Q2 European cocoa grindings falling -7.2% y/y and Q2 Asian cocoa grindings down -16.3% y/y, the smallest amount for a Q2 in 8 years [9] - Chocolate makers like Lindt & Sprüngli AG and Barry Callebaut AG have lowered their sales volume guidance due to high cocoa prices, indicating a potential decline in chocolate demand [4] Group 4: Weather Impact - Recent rains in West Africa are easing dry conditions, which may promote flowering of cocoa trees and boost output, contributing to bearish price pressure [1] - The past 60 days have been the driest on record since 1979 for West Africa, impacting cocoa pod retention before the main crop harvest [6]