Core Viewpoint - Cocoa prices have increased due to weather concerns in West Africa, impacting supply and quality, while global demand remains weak, creating a complex market environment [1][4][10]. Group 1: Price Movements - December ICE NY cocoa closed up +73 (+0.99%) and December ICE London cocoa closed up +68 (+1.33%) on Wednesday [1]. - Cocoa prices fell to 1.5-month lows on Tuesday due to expectations of growing supplies amid weakening demand [4]. Group 2: Supply Factors - Heavy rain in the Ivory Coast has hindered farmers' access to cocoa fields, reducing cocoa movement to ports [1]. - Tighter cocoa inventories in US ports fell to a 4-month low of 2,115,411 bags [3]. - The slowdown in cocoa exports from the Ivory Coast showed a shipment of 1.81 million metric tons (MMT) this marketing year, up +5.8% from last year but down from a larger +35% increase seen in December [7]. - Quality concerns regarding the Ivory Coast's mid-crop cocoa are supportive of prices, with an average estimate of 400,000 metric tons, down -9% from last year's 440,000 metric tons [8]. Group 3: Crop Conditions - Optimism about this year's cocoa crop harvest in West Africa is noted, with a cocoa pod count reported to be 7% above the five-year average [5]. - The past 60 days for West Africa cocoa were the driest on record since 1979, impacting cocoa pod retention before the main crop harvest [6]. - Nigeria's cocoa production is projected to fall -11% year-on-year to 305,000 metric tons for the 2025/26 crop year [9]. Group 4: Demand Dynamics - Weakness in global cocoa demand has been a bearish factor, with Q2 European cocoa grindings falling -7.2% year-on-year to 331,762 metric tons [10]. - The Cocoa Association of Asia reported a -16.3% year-on-year decline in Q2 cocoa grindings to 176,644 metric tons, the smallest amount for a Q2 in 8 years [10]. - Higher cocoa production by Ghana is seen as bearish for cocoa prices, with a projected increase of +8.3% year-on-year to 650,000 metric tons for the 2025/26 crop [11]. Group 5: Global Cocoa Deficit - The International Cocoa Organization revised its 2023/24 global cocoa deficit to -494,000 metric tons, the largest deficit in over 60 years [12]. - The 2023/24 global cocoa production is expected to fall by 13.1% year-on-year to 4.380 million metric tons [12].

Core Viewpoint - Cocoa prices have shown a recovery from 1.5-month lows due to weather concerns in West Africa, leading to short covering in cocoa futures [2] Price Movements - December ICE NY cocoa (CCZ25) increased by +161 (+2.23%) and December ICE London cocoa 7 (CAZ25) rose by +60 (+1.19%) [1] Supply and Demand Dynamics - Cocoa prices initially fell due to expectations of growing supplies amid weakening demand, with chocolate makers like Lindt & Sprüngli AG and Barry Callebaut AG lowering their sales volume guidance [3] - The European Cocoa Association reported a -7.2% year-on-year decline in Q2 European cocoa grindings, while the Cocoa Association of Asia noted a -16.3% year-on-year drop, indicating weak global demand [9] Weather Impact - Heavy rain in the Ivory Coast has hindered farmers from accessing cocoa fields, while dryness in Ghana and Nigeria has damaged crops [2] - The past 60 days have been the driest on record since 1979 for West Africa, affecting cocoa pod retention before the main harvest [5] Crop Estimates - The latest cocoa pod count in West Africa is 7% above the five-year average, indicating a potentially larger crop than last year [4] - The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down -9% from last year's 440,000 MT [7] - Nigeria's Cocoa Association projects an -11% year-on-year decline in cocoa production for the 2025/26 crop year [8] - Ghana's Cocoa Board anticipates an +8.3% year-on-year increase in cocoa production for the 2025/26 crop [10] Inventory Levels - ICE-monitored cocoa inventories in US ports have fallen to a 3.75-month low of 2,133,116 bags, which is supportive for prices [4] Global Cocoa Deficit - The International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit to -494,000 MT, the largest in over 60 years, with production down by 13.1% year-on-year [11]