Global Cocoa Deficit Deeper Than Expected, US Stockpiles Hit 2009 Lows

The global cocoa deficit is more severe than anticipated, with demand projected to exceed production by 462,000 tons, according to the International Cocoa Organization (ICCO). This deficit is driven by adverse weather conditions, disease, and aging cocoa trees. As a result, global cocoa production has fallen to 4.33 million tons, while grinding estimates are revised down to 4.75 million tons. The cocoa industry in West Africa, a major production region, continues to face challenges due to crop disease, limiting the potential for rapid production increases. Despite a surge in cocoa prices earlier this year, they have since retreated from record highs. Technical analysis of New York cocoa futures suggests a potential breakout from a triangle pattern, indicating a significant market move. US cocoa stockpiles have reached their lowest levels since 2009, further highlighting the supply tightness. Confectionery companies like Hershey are passing on increased cocoa costs to consumers, leading to a decline in demand. Some analysts believe the global stocks-to-grinding ratio could reach historic lows by the end of the year, raising concerns about potential inventory depletion.