Cocoa prices experienced a sharp rally on Friday, driven primarily by short covering in the market after second-quarter North American cocoa grindings proved less dire than those seen in Europe and Asia. The unexpected resilience in North American demand offered a glimmer of optimism to a market that has been under significant pressure.
September ICE NY cocoa futures surged by $460, or 6.29 per cent, while September ICE London cocoa gained $193, or 4.02 per cent, by the close of trading.
This rebound follows a challenging week for cocoa prices, which saw New York cocoa sinking to an eight-month nearest-futures low on Thursday, and London cocoa slumping to a 17-month nearest-futures low. The recent weakness had been largely attributed to flagging global cocoa demand. The European Cocoa Association reported on Thursday that Q2 European cocoa grindings fell by 7.2 per cent year-on-year to 331,762 metric tonnes, a steeper decline than the anticipated five per cent drop. Adding to the bearish sentiment, the Cocoa Association of Asia reported that Q2 Asian cocoa grindings plummeted by 16.3 per cent year-on-year to 176,644 metric tonnes, marking the smallest amount for a second quarter in eight years.
Cocoa prices have also been influenced by weather reports from key producing regions. Favourable weather conditions have been reported in cocoa-growing areas of Ivory Coast and Ghana, potentially supporting larger harvests. However, less favourable conditions have been observed in Nigeria and Cameroon, introducing an element of uncertainty.
Ghana, the world’s second-largest cocoa producer, is anticipating an increase in its output. On July 1, the Ghana Cocoa Board projected that the 2025/26 Ghana cocoa crop would increase by 8.3 per cent year-on-year to 650,000 metric tons, up from 600,000 metric tons in 2024/25. This higher production outlook from a major producer typically exerts bearish pressure on prices.
In Ivory Coast, the largest cocoa producer, government data released last Monday showed that farmers shipped 1.73 million metric tonnes of cocoa to ports this marketing year (October 1 to July 13). While this figure represents a 6.8 per cent increase from last year, it marks a significant deceleration from the much larger 35 per cent increase observed in December, suggesting a slowing pace of deliveries.
Despite the overall supply figures, cocoa prices are finding support from significant quality concerns regarding Ivory Coast’s mid-crop cocoa, which is currently being harvested through September. Cocoa processors have voiced complaints about the poor quality of this crop, leading to the rejection of numerous truckloads of Ivorian cocoa beans. Processors have reported that an average of five to six per cent of the mid-crop cocoa in each truckload is of poor quality, a stark contrast to the one per cent seen during the main crop harvest.
According to Rabobank, the inferior quality of Ivory Coast’s mid-crop is partly attributed to late-arriving rain in the region, which constrained crop growth and development. The mid-crop, which typically commences in April, is the smaller of Ivory Coast’s two annual cocoa harvests. The average estimate for this year’s Ivory Coast mid-crop stands at 400,000 metric tonnes, a nine per cent decline from last year’s 440,000 metric tonnes.
According to market watchers, the combination of lower volume and compromised quality from the world’s largest producer could tighten the supply of usable cocoa beans, providing a floor for prices despite demand concerns.
