Cocoa's Record Run: Supply Fears and Thin Trade Drive Prices Higher

Cocoa futures surged towards $11,100 per tonne in late December 2024, rebounding sharply from a three-week low of $9,868 hit on December 27, as supply concerns resurfaced. Farmers in Ivory Coast, the world's largest cocoa producer, reported a lack of rainfall across major growing regions last week, warning that prolonged dry conditions could damage bean quality and reduce supplies starting in February. This news, coupled with chronic underinvestment in cocoa farms and low stock levels, has made the market highly sensitive to developments in the ongoing 2024/25 crop harvest, with the potential for a fourth consecutive global deficit.



Cocoa prices have risen over 150% in 2024, partly due to adverse weather in West Africa. According to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity, cocoa increased 7,329.22 USD/MT or 174.67% since the beginning of 2024. Historically, cocoa reached an all-time high of 12,906 in December of 2024. Cocoa is expected to trade at 9,955.20 USD/MT by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Looking forward, it is estimated to trade at 11,780.21 in 12 months' time.

The rise in cocoa prices is largely due to a global cocoa shortage, which has persisted since early 2024. Disease pressures, climate change, and threatening weather have ravaged crops in West Africa, which contributes around 80% of the world's cocoa output, and cocoa availability is at historical lows. There are also deep-rooted structural issues at play, including chronic underinvestment in cocoa farms, despite recent increases in farm gate prices. Today, the crop is still largely cultivated by smallholder farmers, many of whom struggle to make a living income and lack the means to reinvest in their land, which translates to lower yields over time.



Cocoa increased 7,329.22 USD/MT or 174.67% since the beginning of 2024, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity. Cocoa is expected to trade at 9,955.20 USD/MT by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Looking forward, we estimate it to trade at 11,780.21 in 12 months' time.

Abidjan, 16 August 2024 – The International Cocoa Organization releases the Cocoa Market Report for July 2024. The current report highlights the following insights: As the market enters the last quarter of the season, focus is on the developments of the forward prices for the mid-crop of the 2023/24 season: the JUL-24 and SEPT-24 contracts. Based on the JULY-24 contract, cocoa futures initiated an upward trend in prices during the first week of July. Compared to prices on the first trading day, prices rose by 5% from US$9,352 per tonne to US$9,823 per tonne in London and by 4% from US$7,500 per tonne to US$7,811 per tonne in New York. Issues of supply tightness and stock declines supported the price increase. A year ago, prices were not as high as they currently are.

However, reports of improved weather conditions in Côte d’Ivoire and Ghana led prices to slip to US$9,143 per tonne and US$7,720 per tonne in London and New York, respectively. The dip was short-lived, and prices reversed in a volatile manner as high margin calls led traders to reduce their positions. At the time, open interest was reported to be near their lowest level since 2010. In addition, stronger-than-expected second quarter grindings data from Europe also supported the upward momentum in prices.

From mid-July, the nearby contract shifted to the SEPT-24 contract. Prices remained high and volatile and ranged between US$8,131 per tonne and US$8,832 per tonne in London and in United States between US$7,660 per tonne and US$8,276 per tonne. The extent of the disappointing Côte d’Ivoire and Ghana crops, uncertainties surrounding demand and early predictions of a better crop outlook from top producing countries for the 2024/25 season contributed to the volatile price movements.



Cocoa prices are rising due to factors including a global supply shortage and chronic underinvestment in cocoa farms. Despite hopes for a better crop in the 2024/25 season, cocoa prices look set to remain high in the medium term, hovering around the $6,000/tonne mark once a balanced market is reached. This could in turn impact the chocolate market, with confectionery prices likely to increase in 2025.