The Cocoa Market in Decline

The cocoa market is showing clear signs of exhaustion. The futures market is slowing down and has dropped as low as $7,300. What does this mean? Simple: the market is oversold, long-term funds are liquidating, and the trend since the end of January has been brutally bearish. In other words, cocoa has lost 23% of its value in just a few weeks.

Meanwhile, the chocolate giants are already looking for culprits. Hershey didn't hesitate to point the finger at the exchange for "disconnecting the physical market from the futures market," accusing it of reducing liquidity and increasing volatility. According to them, prices should be between $3,000 and $5,000 per ton, not at the crazy levels we've seen in recent months.

But something doesn't add up. If prices are supposed to be falling, why do chocolate makers keep announcing that chocolate will be even more expensive? Hershey and Mondelez made it clear this week: more price increases are coming. Meanwhile, Lindt continues to break records with operating profits of 884 million Swiss francs, exceeding all expectations. There's something deeper at play here, and it's not just supply and demand.

Ghana and Ivory Coast: Ready to Explode

The heart of the world's cocoa industry remains in crisis. Ghana has lost 30,000 hectares of plantations to illegal mining ( galamsey ) and could lose another 50,000 hectares. The situation is so serious that the European Union and Japan will begin testing Ghanaian cocoa for heavy metals in September. Could African cocoa be rejected by international markets? It wouldn't be unreasonable.

To make matters worse, Cocobod's (Ghana's cocoa regulator) balance sheet is in disarray: it has a debt of $2.1 billion and faces losses of $1.3 billion in paying last season's contracts. President Mahama has not hesitated to accuse Cocobod of being an inefficient and wasteful white elephant, which has left farmers without fair prices. Meanwhile, producers in Ghana and Ivory Coast receive barely $3,000 per ton, when the market has been selling for much more than that.

And if that weren't enough, traders are caught in internal disputes in Côte d'Ivoire. Local exporters and transporters are clashing because major buyers, such as Olam and Barry Callebaut, refuse to pay more than the government-set price. The result? This is creating a logistics strain that could worsen cocoa availability in the short term.

Ecuador: The New Cocoa Powerhouse

While West Africa is reeling, Ecuador continues to soar. In January, it exported 54,620 metric tons of cocoa beans and semi-processed products, an impressive 44.48% increase compared to January 2024. Since the start of the season in October, Ecuador has already exported 231,628 tons, 41.33% more than last year. If this continues, the Andean country will approach the 500,000 metric ton mark this season.

However, not everything is rosy. Heavy rains in cocoa-growing areas have caused flooding, and producers are concerned about a possible outbreak of fungal diseases. If this occurs, the sector's growth could slow.

Where is the Cocoa Market Headed?

Here's the key point: the ICCO projects a surplus of 142,000 tonnes for 2024/25, suggesting that prices could continue to fall. But there are discrepancies. In any case, it's clear that high prices have boosted production, but they've also affected demand.

If the physical market continues to experience logistical problems, if African producers continue to be underpaid, and if Ecuador faces climate challenges, prices could stabilize in a high range. But if production continues to grow and consumption fails to withstand price increases, we could see a deeper correction.

One thing is certain: the cocoa market remains a battleground, and what happens in the coming months will define the future of chocolate worldwide. Can the market finally find its balance?

The answer remains to be seen.