Dollar's Plunge Contributes to Cocoa Price Balance
In the world of cocoa, prices have seen a mixed bag of fortunes this month. On one hand, the decline in the dollar index and a wave of short-covering have provided some support to prices. However, weakness in global demand continues to pose a bearish factor.
Recent reports suggest that Q2 cocoa grindings in Europe and Asia have seen a significant drop. The European Cocoa Association reported a 7.2% year-on-year decrease in Q2 grindings, with figures standing at 331,762 MT. Similarly, the Cocoa Association of Asia reported a 16.3% year-on-year drop in Q2 grindings, amounting to 176,644 MT.
North America hasn't been immune to this trend, with Q2 cocoa grindings falling by 2.8% year-on-year to 101,865 MT. These declines in cocoa grindings indicate a potential slowdown in chocolate production and consumption.
On the production side, Ghana, one of the world's largest cocoa producers, is projected to increase its output. The Ghana Cocoa Board projected that the 2025/26 Ghana cocoa crop would increase by 8.3% year-on-year to 650,000 MT from 600,000 MT in 2024/25.
However, the slowdown in the pace of cocoa exports from the Ivory Coast, the world's largest cocoa producer, has been a bullish factor for prices. The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down 9% from last year's 440,000 MT. The poor quality of the mid-crop cocoa is partly attributed to late-arriving rain in the region, which limited crop growth.
Meanwhile, another supportive factor for cocoa comes from the smaller cocoa production in Nigeria, the world's fifth-largest cocoa producer. Nigeria's Cocoa Association projects that Nigeria's 2025/25 cocoa production will fall 11% year-on-year to 305,000 MT from a projected 344,000 MT for the 2024/25 crop year.
Not all news has been bearish for cocoa prices. Chocolate manufacturers have faced challenges, with companies like Barry Callebaut AG and Lindt & Sprüngli AG reducing their sales volume and margin guidance due to lower chocolate sales. These challenges could potentially lead to increased demand for cocoa.
Cocoa prices, as of today, are showing signs of recovery. December ICE NY cocoa (CCZ25) is currently up 79 (+1.07%), and December ICE London cocoa #7 (CAZ25) is up 5 (+0.10%). These increases come after cocoa prices fell sharply on Thursday, with London cocoa posting a 6-week low.
The recent weather concerns in West Africa's cocoa-producing regions, which led to a rally in cocoa prices to two-month highs last month, may still play a role in the market's future movements. The latest cocoa pod count in West Africa, according to Mondelez International, is 7% above the five-year average, offering some optimism for the future of cocoa production.
In a separate development, the company mentioned as the fastest growing software company in 2025 is Databricks, but this news does not seem to have a direct impact on the cocoa market at this time.
In conclusion, while global cocoa demand remains weak, production trends and market dynamics continue to shape the cocoa market. The potential impacts of weather conditions, chocolate manufacturers' challenges, and the ongoing production slowdowns in key cocoa-producing countries will continue to influence cocoa prices in the coming months.
