Cocoa Slides To Multi-Month Low As Demand Destruction Fears Overshadow Tight Supplies

Cocoa futures in New York tumbled to a two-and-a-half-month low last week as demand destruction concerns continue to flourish this month, overshadowing concerns about poor output in West Africa. 

Bloomberg reported Thursday that the top bean growers in the Ivory Coast had a very slow start to next season’s harvest, which begins in October. The slow start has been blamed on pricier hedges for traders, with prices hovering over $10,000 a ton for the last few months. Higher bean prices and increased volatility also forced the exchange to raise margin costs. 

Executives from Hershey and Mondelez warned last week that bean prices could move higher amid emerging signs of demand destruction for their sugary products.

Earlier this month, Piper Sandler analyst Michael Lavery asked Hershey CEO Michele Buck about the consumer environment for chocolate…

Buck responded that higher bean prices have “created some demand destruction in the market.”

Mondelez CFO Luca Zaramella recently said, “We are seeing signs, particularly in parts of the world like North America, where cocoa consumption is coming down.”

To close the week, demand destruction fears drove cocoa futures in New York down to $8,934 per ton, a two-and-a-half-month low. However, prices remain extraordinarily elevated compared to early 2023 levels.

Judy Ganes, president of New York-based J. Ganes Consulting, explained to Bloomberg that traders were operating under the assumption that chocolate demand would hold up through the holiday season into the first quarter. Yet she pointed out that does not appear to be the case.

Traders were wrestling between structural output challenges in the West African cocoa market while weighing news concerns over demand destruction. 

We wonder if Goldman’s commodity derivatives analyst Hugo Fuentes is still “go long cocoa” based on “structural supply deficits, under-hedged consumers, and historically low warehouse stocks.” 

What about Pierre Andurand, founder of Andurand Capital Management LLP? Is he still cocoa’s biggest bull?