Global cocoa prices would fall from previous record-highs on the back of a projected rebound in production, an international research firm said.
BMI, a unit of Fitch Solutions, recently revised downward its cocoa price forecast for 2025 to $8,200 per metric ton (MT) from $8,500 per MT due to easing bullish sentiment in the market.
‘Part of this has been driven by technical adjustments from an overbullish market, but the main drivers have been improving expectations regarding supply as well as signs that demand destruction in the face of elevated prices is happening.’
Such a pivot in market sentiment was due to projections that cocoa output in West Africa, a cocoa powerhouse, would replenish global inventories, the research firm said.
‘We forecast that production of cocoa globally in 2024/25 will increase by 8 percent year-on-year, driven mainly by an improvement in harvests in West Africa.’
BMI noted that better weather conditions and improvement in farmgate prices in cocoa-producing countries in the region would help buoy output.
‘In West Africa, we believe that improved weather conditions will be favorable for cocoa production, and we also flag the recent increase in farmgate prices in both Ghana and Côte d’Ivoire as an upside risk for production.’
It added that investments poured into cocoa production outside West Africa due to the spike in prices would also bolster yield.
‘Outside of West Africa, we believe that higher prices over the past few years have driven increased investment in cocoa production in Latin America and Asia,’ BMI said.
‘While cocoa trees require five years between planting and production, and we will therefore see the effects of new trees becoming productive over the medium term, growing investment will boost yields from existing cocoa trees through improved input use and agronomic practices.’
Despite this, BMI noted global consumption would drop by 4.3 percent year-on-year in 2024/25, which would result in a return to a market surplus following three consecutive deficits.
‘The most recent data from cocoa grindings is evidence of the fact that, although this has taken longer than the market had expected, demand destruction in the face of elevated prices is occurring.’
The research firm noted that data from grindings in the second quarter pointed to a 9.4 percent year-on-year decline on a global level.
The largest decrease was recorded in Asia at 16.3 percent due to chocolate being less of a staple in the region compared to Europe and the United States, it added.
‘Elevated prices are driving companies to use alternative ingredients to cocoa beans and cocoa butter or decrease the amount of cocoa in their products.’
BMI also flagged the EU Commission’s intention to delay the implementation of the EU Deforestation Regulation (EUDR) to January 2026.
‘On one hand, this delay is a downside risk for prices as it reduces the possibilities of some cocoa being unable to enter the market due to non-compliance,’ the firm said.
‘On the other hand, we note that chocolate manufacturers such as Barry Callebaut, as well as environmental groups, have voiced concern about this because many have already invested significant resources to comply with the regulation, and this would increase uncertainty in the market.’