Decrease in Cocoa Prices Due to Anticipated Low Consumption during Q2
The cocoa market is currently experiencing a complex interplay of factors, with production, weather conditions, and quality concerns shaping the outlook for mid-2025.
**Production and Supply**
Ghana, the world's second-largest cocoa producer, is projecting an 8.3% increase in cocoa production for the 2025/26 season, raising its crop from 600,000 MT to 650,000 MT. This forecasted growth is expected to contribute to a potential price decrease. Meanwhile, Côte d’Ivoire’s mid-crop, which runs from April through September, is estimated at about 400,000 MT for 2025, down 9% year-over-year due to late rain affecting growth. Overall, global production is expected to rise, with rest-of-world output increasing by roughly 10% compared to the prior year.
**Weather Conditions**
Beneficial rains in West Africa have recently improved crop conditions, leading to a drop in cocoa prices. However, drought still affects over a third of Ghana and Côte d’Ivoire, posing ongoing risks. The International Cocoa Organisation (ICCO) notes varying rainfall in Côte d’Ivoire but generally adequate moisture through the April-September mid-crop period, though rising temperatures could stress young pods and trees.
**Quality Concerns**
Processors have reported issues with the quality of the mid-crop beans in Côte d’Ivoire, rejecting about 5-6% of some loads compared to roughly 1% during the main crop. This degradation is attributed mainly to late-arriving rains that limited crop development.
**Market and Prices**
The World Bank anticipates cocoa prices to rise about 9% in 2025, supported by tight carryover stocks and delays in supply recovery. Yet, prices are forecasted to decline by roughly 13% in 2026 as production begins to outpace demand, particularly from Côte d’Ivoire and Ghana. ING notes that despite a recent sharp price drop from 2024 highs and expectations of a small global surplus (~142,000 tonnes), the market remains volatile due to thin liquidity and the potential for weather shocks.
Recent Q2 grindings and demand data are weak, putting upward price pressure on hold, with short-covering gains seen but tempered by rising output, especially from Ghana. Hershey confirms no concerns about the global physical cocoa supply and notes improving fundamentals, with port arrivals up about 30% year-on-year in Côte d’Ivoire and Ghana. However, Hershey expects margin compression due to historically high cocoa prices and other inflationary pressures.
In summary, the cocoa market is currently characterized by improving production, especially in Ghana, and favorable weather rains, which have supported the crop. However, quality issues in Côte d’Ivoire’s mid-crop remain a concern. Prices in 2025 have been pressured downward from their 2024 peaks due to rising output and a small surplus forecast, though the market remains vulnerable to weather variability and tight inventories. Longer-term, prices are expected to soften in 2026 as global supply growth outpaces demand. Industry players remain watchful of quality and climatic risks that could disrupt this outlook.
Technology could play a crucial role in addressing quality concerns in the cocoa market, with precision agriculture techniques potentially aiding farmers in cultivating higher-quality cocoa beans. Moreover, advancements in storage and transportation technology could help manage the delays in supply recovery and protect against weather shocks, ensuring a stable cocoa supply towards mid-2025.
