Cocoa hits 4-month low on prospects of weak demand, supply boost

Cocoa futures fell to the lowest in more than four months as traders weigh improved supply in the next season against the prospects of weaker demand, Report informs via Bloomberg.

The most-active contract fell as much as 4.4% to $6,650 a ton in New York, the lowest price since early March. Futures are down about 13% this month after more than doubling earlier this year, as the end of the El Niño weather pattern and a potential shift to La Niña is set to boost production.

An improving outlook for the next season has weighed on prices, with some analysts seeing the market flipping to a surplus in the upcoming 2024-2025 season after three consecutive years of deficit. Still, analysts at Fitch Solutions’ BMI unit said they “remain cautious” about rebounding production in top producers Ivory Coast and Ghana, and forecast a small 110,000-ton deficit for the season.

A sustained period of elevated cocoa prices, which is expected to continue, will likely impact demand and result in a slowdown in grindings, the analysts said. Chocolate companies have already warned margins could come under pressure in the second half of the year as they purchase beans at higher prices following this year’s rally.

KitKat maker Nestle SA flagged a “tough consumer environment” in an earnings call last week, as customers seek cheaper goods. Lindt & Spruengli AG said the global chocolate market was seeing a slowdown for some products.