Cocoa Prices on the Rise as US Stockpiles Hit a Four-Year Low

A Triangle Pattern in Cocoa Futures

Cocoa futures in New York have been fluctuating within a symmetrical triangle pattern since they reached a peak of nearly $12,000 per ton in the middle of April, with support found around the $7,000 mark. This morning, futures are on the rise as traders express concern over the diminishing stockpiles in US warehouses.

US Cocoa Stockpiles at Their Lowest Since 2019

Recent data from ICE exchange-monitored warehouses reveal that US cocoa stockpiles have dropped to their lowest levels since December 2019. Given the global tightening of cocoa supplies, it's expected that the number of bags held in US warehouses could continue to decrease in the coming weeks or months. The most active contract saw an increase of up to 5.6% in New York. The inventories of cocoa beans in the US have reached their lowest point in over four years, as market tightness forces grinders to reduce inventories in exchange-monitored warehouses.

Concerns Over Future Cocoa Surplus

Bloomberg has reported that, despite expectations of a cocoa market surplus in the 2024-25 season, there are growing concerns among commercial users about potential shortages. This is due to poor harvests in West Africa in previous years. The latest data shows that cocoa arrivals at ports in the Ivory Coast, the top grower, are still more than a quarter behind the previous season.

Higher Cocoa Costs Passed on to Consumers

The rise in cocoa costs is being passed on to consumers, many of whom are already cash-strapped. Last week, the iconic US chocolate maker Hershey announced that it had cut its sales and earnings outlook for the year as customers reduced their purchases of higher-priced chocolates and candies. This suggests that demand destruction is beginning to occur.

Expectations of Better Harvests in West Africa

In addition to fears of consumer demand destruction, cocoa prices have been impacted by expectations of improved harvests in West Africa. Despite these fluctuations, prices are still 116% higher than they were at the start of the year.

Optimism for Cocoa Stocks

Despite these price fluctuations, oil trader Pierre Andurand remains optimistic, predicting that the stocks-to-grinding ratio for the world will be at its lowest ever by the end of the year, potentially leading to a complete depletion of inventories late in the year.

Bottom Line

The cocoa market is currently experiencing a period of significant change, with prices fluctuating and stockpiles in the US reaching a four-year low. This has led to concerns about potential shortages and rising costs for consumers. However, there is also optimism about the future, with expectations of improved harvests in West Africa and predictions of a global cocoa surplus in the 2024-25 season. What are your thoughts on this situation? Do you think the cocoa market will stabilize, or will the fluctuations continue? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.