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Cocoa prices on Thursday settled mixed, with NY cocoa climbing to a 5-week high.  NY cocoa found support Thursday on signs of tighter supplies after ICE-monitored cocoa inventories held in US ports fell to a 1.75-month low of 2,283,787 bags.   However, London cocoa was under pressure due to the strength in the British pound (^GBPUSD), which rallied to a 1.5-week high on Thursday, undercutting cocoa that is priced in terms of sterling.

Cocoa has support from the slowdown in the pace of Ivory Coast cocoa exports.  Monday's government data showed that Ivory Coast farmers shipped 1.76 MMT of cocoa to ports this marketing year from October 1 to August 3, up +6% from last year but down from the much larger +35% increase seen in December.

Concerns about dry weather in West Africa are also bullish for cocoa prices.  According to the European Centre for Medium-Range Weather Forecasts, rainfall in the Ivory Coast and Ghana this season remains below the 30-year average, and combined with high temperatures, risks hurting cocoa pod development for the main crop harvest that starts in October.

Quality concerns regarding the Ivory Coast's mid-crop cocoa, which is currently being harvested through September, are supportive of prices.  Cocoa processors are complaining about the quality of the crop and have rejected truckloads of Ivory Coast cocoa beans.  Processors reported that about 5% to 6% of the mid-crop cocoa in each truckload is of poor quality, compared with 1% during the main crop.  According to Rabobank, the poor quality of the Ivory Coast's mid-crop is partly attributed to late-arriving rain in the region, which limited crop growth.  The mid-crop is the smaller of the two annual cocoa harvests, which typically starts in April.  The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down -9% from last year's 440,000 MT.

Another supportive factor for cocoa is smaller cocoa production in Nigeria, the world's fifth-largest cocoa producer.  Nigeria's Cocoa Association projects Nigeria's 2025/25 cocoa production will fall -11% y/y to 305,000 MT from a projected 344,000 MT for the 2024/25 crop year.  In related news, Nigeria's Jun cocoa exports rose +0.9% y/y to 14,597 MT.

Concerns over tepid chocolate demand are bearish for cocoa prices.  Last month, chocolate maker Lindt & Spruengli AG lowered its margin guidance for the year due to a larger-than-expected decline in first-half chocolate sales.  Also, chocolate maker Barry Callebaut AG reduced its sales volume guidance earlier this month for a second time in three months, citing persistently high cocoa prices.  The company projects a decline in full-year sales volume and reported a -9.5% drop in its sales volume for the March-May period, the largest quarterly decline in a decade.

Cocoa prices sold off last month, with NY cocoa sinking to an 8.5-month nearest-futures low and London cocoa slumping to a 17-month nearest-futures low.   Weakness in global cocoa demand has hammered prices.  The European Cocoa Association reported on July 17 that Q2 European cocoa grindings fell by -7.2% y/y to 331,762 MT, a bigger decline than expectations of -5% y/y.  Also, the Cocoa Association of Asia reported that Q2 Asian cocoa grindings fell -16.3% y/y to 176,644 MT, the smallest amount for a Q2 in 8 years.  North American Q2 cocoa grindings fell -2.8% y/y to 101,865 MT, which was a smaller decline than the declines seen in Asia and Europe.

Higher cocoa production by Ghana is bearish for cocoa prices.  On July 1, the Ghana Cocoa Board projected the 2025/26 Ghana cocoa crop would increase by +8.3% y/y to 650,000 from 600,000 MT in 2024/25.  Ghana is the world's second-largest cocoa producer.

On May 30, the International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit to -494,000 MT from a February estimate of -441,000 MT, the largest deficit in over 60 years.  ICCO said 2023/24 cocoa production fell by 13.1% y/y to 4.380 MMT.  ICCO stated that the 2023/24 global cocoa stocks-to-grindings ratio declined to a 46-year low of 27.0%.  Looking ahead to 2024/25, ICCO on February 28 forecasted a global cocoa surplus of 142,000 MT for 2024/25, the first surplus in four years.  ICCO also projected that 2024/25 global cocoa production will rise +7.8% y/y to 4.84 MMT.