Cocoa Prices Decline Amid US Dollar Strengthening
In the world of commodities, the price of cocoa continues to be a topic of interest for investors and chocolate manufacturers alike. Here's a roundup of the latest developments in the cocoa market.
Last Tuesday, ICE-monitored cocoa inventories held in US ports reached a 10.5-month high of 2,368,141 bags, a sign of ample supply [1]. However, this abundance is somewhat countered by the tight carryover stocks and lagging supply recovery from West African producers, the main global suppliers. The World Bank forecasts a 9% price increase over 2025 due to these supply constraints [1].
The British pound's fall to a 2.25-month low has contained losses in London cocoa futures, as cocoa is priced in terms of sterling. This means that a weaker pound boosts cocoa prices in the UK [2].
A significant short position by commodity funds in London cocoa futures raises the potential for short covering, which could lead to further price increases [2]. In fact, cocoa prices on the Plus500 trading platform are offering a commission-free bonus of up to $200, reflecting the market's optimism [3].
However, concerns about the slowdown in the pace of Ivory Coast cocoa exports initially extended Monday's rally to 4-week highs [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 [5]. Adverse weather conditions, such as drought and below-average rainfall, have restricted crop development, raising concerns about the main crop expected from October onward [1][4].
Despite these concerns, the current outlook for cocoa prices in 2025 is generally bullish, supported by these supply constraints, weather risks, and tight stocks, despite some short-term price fluctuations. Prices have shown some recent decline but remain above last year’s levels and are expected to rise further [6].
Analysts estimate prices could reach around $8,770 by the end of the quarter and over $10,200 within 12 months [3]. Currency fluctuations also affect pricing, with a strong US dollar putting downward pressure on New York futures, while a weaker British pound has supported London cocoa prices [4].
Some companies, like Hershey, have already announced price increases reflecting the higher cocoa costs, implying expectations of sustained elevated prices throughout the rest of 2025 [5]. Chocolate maker Barry Callebaut AG reduced its sales volume guidance for a second time in three months, citing persistently high cocoa prices as a factor [7].
Cocoa processors are complaining about the quality of the Ivory Coast's mid-crop cocoa, with about 5% to 6% of the mid-crop cocoa in each truckload being of poor quality [8].
In summary, cocoa prices face upward pressure over the medium term due to supply tightness exacerbated by weather challenges and slow recovery in production, balanced against seasonal demand patterns and currency effects. Market consensus projects further price increases through 2025 and into 2026 [1][3][4].
References:
- World Bank
- Financial Times
- Reuters
- Bloomberg
- Hershey
- ICCO
- Barry Callebaut
- Reuters
In the context of business and finance, cocoa processors and chocolate manufacturers are closely monitoring the bullish outlook for cocoa prices in 2025, as predicted by the World Bank, due to supply constraints, weather risks, and tight stocks in the market. The latest developments in the cocoa market also indicate that currency fluctuations can impact cocoa prices, with a weaker British pound supporting London cocoa prices while a strong US dollar puts downward pressure on New York futures.
