Cocoa gains 5% 🚀

Cocoa prices see a pre-holiday rally driven by fears of supply decline 💰

Today, cocoa gains 5.40%, reaching new record levels. At the time of publication, the price for a ton of cocoa is nearly 9,000 USD, and the outlook for the coming months is not promising. The increase occurs a week before the holidays when the seasonal demand for cocoa is very high.

• Chocolate prices are reaching record levels this year due to a combination of several factors, including poor harvests in West Africa. This region accounts for about 70% of global cocoa production, and over the last three years, harvests have been smaller due to warmer and drier climates, which hinder cocoa cultivation.

• Prices have doubled since the beginning of the year, heading towards 10,000 USD. Moreover, more and more companies are trying to find substitutes for cocoa or new supply directions.

• Malaysia's Guan Chong, one of the largest cocoa processors, is actively seeking cocoa supplies from countries such as Ecuador, Peru, and Indonesia, as concerns arise about non-fulfillment of contracts by major planters from Ivory Coast and Ghana.

• ICCO expects a record deficit this year, reaching 400,000 tons. Bloomberg Intelligence analysts have raised concerns, suggesting that the supply problem may not easily pass and could turn into a structural challenge for the entire market. At the same time, global demand for cocoa is growing.

Such a sharp increase in cocoa prices has a significant impact on the chocolate industry. Manufacturers have already begun to partially pass on costs to consumers. This problem particularly affects the markets in Europe, which is one of the more important consumers of this raw material. Additionally, this issue is compounded by new EU regulations aimed at limiting the consumption of products contributing to deforestation.

• Cocoa production falls to its lowest levels since the 2015/2016 season
• We are in the third consecutive year of deficit. Deliveries to ports are often 20-30% lower than the previous year.
• The deficit will be difficult to overcome through increased production.

Source: xStation 5