(Bloomberg) -- The outlook for top grower Ivory Coast’s cocoa harvest is souring, with bad weather and a virulent crop disease threatening to deepen a global supply crunch and add to the price rally that has blown past records.
Production in the country, which accounts for more than a third of global production, is expected at 1.9 million tons in the 2024-25 season, according to an average of eight analyst and trader estimates compiled by Bloomberg. That’s down nearly 10% from a government outlook of about 2.1 to 2.2 million tons near the start of the season in October.
Poor harvests in West Africa — the biggest cocoa hub — plunged the world into its largest-ever supply deficit last year, and waning prospects in Ivory Coast will now make rebuilding those stockpiles more tenuous. That could dampen traders’ earlier expectations for a small surplus and extend the dizzying streak for prices that’s hit both chocolate makers and consumers. Cocoa futures surged to an all-time high of $11,925 a ton this week.
While climate change remains a top challenge, low farmer pay and swollen shoot virus — an incurable crop disease — continues to impact yields in Ivory Coast.
“The outlook for cocoa is still for a very tight market and very volatile market,” said Steve Wateridge, head of research at TRS by Expana. “As a company we’ve been disappointed with the lack of efforts to address the structural issues that contributed to reduced output in the last season.”
Favorable weather during the development of the main-crop had fueled hopes of a better harvest with chocolate companies talking up the expected recovery in earnings calls. But that outlook has dimmed after heavy rains lashed farms, knocking down flowers and also hurting bean quality.
A spokesperson for Ivory Coast’s industry regulator, Le Conseil Cafe-Cacao, declined to comment.
Now, the seasonal Harmattan winds raise the risk of drying out soil and stressing the smaller mid-crop that is typically collected from April.
Soil moisture for the past month has been much lower than normal and lower compared to the last few years, according to Brandon Fox, operational meteorologist at weather forecaster Maxar Technologies Inc.
What Bloomberg Intelligence Says
As cocoa prices continue their ascent, our scenario analysis points to a fourth consecutive cocoa-market deficit in the season that started Oct. 1, contrary to the view from Barry Callebaut, Hershey and some sell-side analysts. Going into 2025, tree diseases and robust chocolate demand could precipitate concerns about multiyear structural deficits, adding upside risk to prices that more than tripled through 2024.
— Ignacio Canals Polo, analyst
Click here for the research
Global stockpiles are also at the lowest in decades with inventories in exchange approved warehouses in the US shrinking daily.
On the demand front, bean processing has been surprisingly strong so far this year, and the next quarterly figures due in January will give more clues on whether that has held up.
“There is not going to be the surplus that everyone was anticipating,” said Julio Moscoso, commercial director at Latam Commodity Traders. “Prices will continue to rally as hedge funds re-enter the market but we will eventually see a vengeful correction in prices.”
--With assistance from Baudelaire Mieu.
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