September ICE NY cocoa (CCU25) on Friday closed down -118 (-1.37%), and September ICE London cocoa #7 (CAU25) closed down -21 (-0.38%). Cocoa prices gave up an early advance Friday and settled lower, with NY cocoa falling from a 5-week high. Concern about tepid chocolate demand are bearish for cocoa prices.\n\nChocolate maker Lindt & Spruengli AG in July lowered its margin guidance for the year due to a larger-than-expected decline in first-half chocolate sales. Also, chocolate maker Barry Callebaut AG in July reduced its sales volume guidance for a second time in three months, citing persistently high cocoa prices. The company projects a decline in full-year sales volume and reported a -9.5% drop in its sales volume for the March-May period, the largest quarterly decline in a decade.\n\nStrength in the British pound was bearish for London cocoa after the British pound (^GBPUSD) rallied to a 2-week high Friday, which undercuts cocoa that is priced in terms of sterling.\n\nNY cocoa initially rose to a 5-week high Friday on signs of tighter supplies after ICE-monitored cocoa inventories held in US ports fell to a 1.75-month low of 2,270,713 bags on Friday.\n\nCocoa has support from the slowdown in the pace of Ivory Coast cocoa exports. Monday's government data showed that Ivory Coast farmers shipped 1.76 MMT of cocoa to ports this marketing year from October 1 to August 3, up +6% from last year but down from the much larger +35% increase seen in December.\n\nConcern about dry weather in West Africa are bullish for cocoa prices. According to the European Centre for Medium-Range Weather Forecasts, rainfall in the Ivory Coast and Ghana this season remains below the 30-year average, and combined with high temperatures, risks hurting cocoa pod development for the main crop harvest that starts in October.\n\nQuality concerns regarding the Ivory Coast's mid-crop cocoa, which is currently being harvested through September, are supportive of prices. Cocoa processors are complaining about the quality of the crop and have rejected truckloads of Ivory Coast cocoa beans. Processors reported that about 5% to 6% of the mid-crop cocoa in each truckload is of poor quality, compared with 1% during the main crop. According to Rabobank, the poor quality of the Ivory Coast's mid-crop is partly attributed to late-arriving rain in the region, which limited crop growth. The mid-crop is the smaller of the two annual cocoa harvests, which typically starts in April. The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down -9% from last year's 440,000 MT.\n\nAnother supportive factor for cocoa is smaller cocoa production in Nigeria, the world's fifth-largest cocoa producer. Nigeria's Cocoa Association projects Nigeria's 2025/25 cocoa production will fall -11% y/y to 305,000 MT from a projected 344,000 MT for the 2024/25 crop year. In related news, Nigeria's Jun cocoa exports rose +0.9% y/y to 14,597 MT.\n\nWeakness in global cocoa demand has been a bearish factor for cocoa prices. The European Cocoa Association reported on July 17 that Q2 European cocoa grindings fell by -7.2% y/y to 331,762 MT, a bigger decline than expectations of -5% y/y. Also, the Cocoa Association of Asia reported that Q2 Asian cocoa grindings fell -16.3% y/y to 176,644 MT, the smallest amount for a Q2 in 8 years. North American Q2 cocoa grindings fell -2.8% y/y to 101,865 MT, which was a smaller decline than the declines seen in Asia and Europe.\n\nHigher cocoa production by Ghana is bearish for cocoa prices. On July 1, the Ghana Cocoa Board projected the 2025/26 Ghana cocoa crop would increase by +8.3% y/y to 650,000 from 600,000 MT in 2024/25. Ghana is the world's second-largest cocoa producer.\n\nOn May 30, the International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit to -494,000 MT from a February estimate of -441,000 MT, the largest deficit in over 60 years. ICCO said 2023/24 cocoa production fell by 13.1% y/y to 4.380 MMT. ICCO stated that the 2023/24 global cocoa stocks-to-grindings ratio declined to a 46-year low of 27.0%. Looking ahead to 2024/25, ICCO on February 28 forecasted a global cocoa surplus of 142,000 MT for 2024/25, the first surplus in four years. ICCO also projected that 2024/25 global cocoa production will rise +7.8% y/y to 4.84 MMT.

Demand Concerns Weigh on Cocoa Prices

Cocoa prices declined on Friday amid concerns over weak global chocolate demand, with NY and London cocoa both falling. Chocolate makers Lindt & Spruengli and Barry Callebaut reduced sales guidance due to high cocoa prices and declining sales volumes. Strength in the British pound negatively impacted London cocoa pricing. Supply-side factors include lower Ivory Coast exports, poor mid-crop quality, and reduced Nigerian production, while higher Ghanaian production and a revised global deficit in 2023/24 contributed to bearish sentiment. Global cocoa grindings declined in Europe and Asia, with a record low stocks-to-grindings ratio in 2023/24, and ICCO forecasts a global surplus for 2024/25.