Cocoa prices rallied sharply, with NY cocoa reaching a two-week high and London cocoa a 2.5-week high, primarily driven by supply concerns following the EU's proposed six-month delay for enforcing deforestation laws and declining ICE-monitored inventories. Further bullish impetus came from a significant slowdown in Ivory Coast exports, projected lower Nigerian production, and the International Cocoa Organization's (ICCO) revised 2023/24 global deficit to a 60-year high. However, the rally is tempered by bearish factors such as weak Q3 cocoa grindings in Asia and Europe, declining North American chocolate sales, an improved crop outlook in Ivory Coast, and ICCO's forecast for a 2024/25 global surplus, suggesting a complex outlook despite current price strength.
December ICE NY cocoa surged +6.46% and London cocoa +8.71%, reaching multi-week highs, primarily driven by escalating supply concerns. The EU's proposed six-month delay for deforestation law enforcement, rather than a year, implies tighter traceability requirements and potential supply restrictions. This concern is amplified by ICE-monitored US cocoa inventories falling to a 6.5-month low of 1,854,690 bags, alongside a significant net-short position by commodity funds in London cocoa, the largest in over three years, suggesting potential for a short-covering rally. Global supply dynamics remain complex, with Ivory Coast exports down -31% year-over-year for the first 19 days of October, signaling immediate tightness. Nigeria, the fifth-largest producer, projects an 11% year-over-year production decline for 2025/26 to 305,000 MT. The International Cocoa Organization (ICCO) recently revised its 2023/24 global deficit to a 60-year high of -494,000 MT, with production falling 13.1% year-over-year, and the stocks-to-grindings ratio at a 46-year low of 27.0%. Counterbalancing these supply concerns are clear signs of weakening global demand and an improved future supply outlook. Q3 cocoa grindings in Asia and Europe fell -17% and -4.8% year-over-year respectively, marking multi-year lows, while North American chocolate sales volumes declined over 21%. Despite current tightness, the ICCO forecasts a 2024/25 global surplus of 142,000 MT, the first in four years, with production expected to rise 7.8% year-over-year, supported by an improved Ivory Coast crop outlook and surging Ghana deliveries.
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