Dollar Strength Weighs on Cocoa Prices | U.S. Markets

Might ICE NY cocoa (CCK25) Friday closed down -131 (-1.42%), and Might ICE London cocoa #7 (CAK25) closed down -112 (-1.50%).

Cocoa costs Friday posted average losses.  Friday’s rally within the greenback index (DXY00) to a 2-week high weighed on most commodity costs, together with cocoa.

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Additionally, indicators of greater cocoa provides are bearish for costs after Thursday’s news confirmed Nigeria’s Jan cocoa exports jumped +27% y/y to 46,970 MT.  Nigeria is the world’s fifth-largest cocoa producer.

On Monday, cocoa costs sank to 3-1/4 month lows after executives from chocolate makers Hershey and Mondelez just lately warned that high costs are hurting demand.  On February 4, Mondelez executives warned of a potential slowdown in chocolate demand when CFO Zarmella stated, “We are seeing signs, particularly in parts of the world like North America, where cocoa consumption is coming down.”  Additionally, final Tuesday, the company warned that chocolate costs may rise as a lot as 50% due to the surge in cocoa costs, which might curb chocolate demand.  As well as, Hershey executives stated on February 6 that high cocoa costs are forcing it to reformulate recipes by changing cocoa with different ingredients.  

Excessive cocoa costs decreased cocoa demand in This autumn, as seen within the quarterly grinding stories.  On January 9, the European Cocoa Affiliation reported that This autumn European cocoa grindings fell -5.3% y/y to 331,853 MT, the bottom in more than 4 years.  Additionally, the Cocoa Affiliation of  Asia reported that This autumn Asian cocoa grindings fell -0.5% y/y to 210,111 MT, additionally the bottom in 4 years.  As well as, the Nationwide Confectioners Affiliation reported that This autumn North American cocoa bean grindings fell -1.2% y/y to 102,761 MT.

Concern about slowing Ivory Coast cocoa exports is a supportive issue for cocoa costs.  Whereas authorities information Monday confirmed Ivory Coast farmers shipped 1.36 MMT of cocoa to ports to this point on this advertising and marketing 12 months from October 1 to February 23, up +17% from final 12 months, the tempo has fallen from the 35% rise seen in December.

Tight world cocoa inventories are bullish for costs.  ICE-monitored cocoa inventories held in US ports have been trending decrease for the previous 1-1/2 years and fell to a 21-year low of 1,263,493 baggage on January 24.  Nonetheless, as of Thursday, cocoa inventories have since recovered to a 2-1/2 month high of 1,452,105 baggage.

Smaller cocoa provides from Ghana, the world’s second-biggest cocoa producer, are supportive for costs after Cocobod, Ghana’s cocoa regulator, cut its Ghana 2024/25 cocoa harvest forecast in December for the second time this season to 617,500 MT, down -5% from an August estimate of 650,000 MT.  

In a bullish issue, the Worldwide Cocoa Affiliation (ICCO) on November 22 raised its 2023/24 world cocoa deficit estimate to -478,000 MT from Might’s -462,000 MT, the biggest deficit in over 60 years.  ICCO additionally cut its 2023/24 cocoa manufacturing estimate to 4.380 MMT from Might’s 4.461 MMT, down -13.1% y/y.  ICCO projected a 2023/24 world cocoa shares/grindings ratio of 27.0%, a 46-year low. 

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