Cocoa prices fall 6.5%, giving up their highest levels in 50 years

Cocoa prices fell about 6.5% at the end of trading on Monday, giving up their highest levels in 50 years, driven by optimism about the recovery of supplies and concerns about slowing demand.

Cocoa futures for December delivery recorded a decline of about 6.5% on the New York Stock Exchange, while their counterparts on the London Stock Exchange fell by about 5.35%, at the end of trading on Monday.

According to CNN, futures contracts began trading on Tuesday’s session mixed, which raises questions about the fate of cocoa prices in the coming period.

The drop comes after cocoa prices hit their highest level in nearly 50 years, peaking at nearly $12,000 per tonne in the first half of 2024.

According to the International Cocoa Organization, global production for the 2023-24 season fell by 14.2 percent, due to a third consecutive year of lower productivity in West Africa, where 70 percent of the world’s cocoa is grown.

On August 20, 2024, the Ghana Cocoa Board lowered its estimate for Ghana’s cocoa production for next year 2024-25 to 650,000 metric tons from its June forecast of 700,000 metric tons, due to poor weather and crop diseases.

Ghana’s cocoa crop, the world’s second-largest producer, fell to its lowest level in 23 years at 425,000 metric tons for the 2023-24 season. Prices were also boosted by chocolate makers who bought cocoa beans in London heavily through August, aiming to fill their stockpiles ahead of new EU deforestation legislation that comes into effect in January 2025.

The sharp rise in cocoa prices has sparked a race among cocoa bean producers to secure high-quality beans, and it appears to be paying off, pushing prices lower over the past week but they remain near historically high levels.

Most of Ivory Coast’s main cocoa regions received below-average rainfall last week, but farmers said it was enough to boost the next main crop from October to March.

Jefferies also warned that chocolate sales were weakening significantly compared to other snack categories, with higher prices prompting consumers to switch to cheaper snacks, which could put further pressure on cocoa prices going forward.