(Bloomberg) — Cocoa dropped in New York, heading for a weekly decline, amid concerns about weaker demand in the wake of record prices.
Futures slipped as much as 10% to hit the lowest since early December. Cocoa’s recent surge to an all-time high on the back of poor output in West Africa has the market watching for any signs that demand may be slowing.
In top grower Ivory Coast, sales of next season’s harvest that starts in October are off to a slow start, Bloomberg reported Thursday. That’s because it has become costlier for traders to hedge purchases, after last year’s rally prompted the exchange to raise the amount that they’re required to pay in margins.
At the same time, traders are keeping an eye out for clues on how chocolate consumption is faring. Executives from Hershey Co. and Mondelez International Inc. this week signaled more price increases may be coming as the chocolate makers navigate a sustained rally in cocoa.
The market had been operating under the assumption that chocolate demand was holding up well, but concerns over shifts in consumer behavior have now emerged, said Judy Ganes, president of New York-based J. Ganes Consulting.
Meanwhile, a dispute between major exporters and local shippers in Ivory Coast has added to worries over near-term tightness in the market. A group of local shippers wants the nation to allow them to export beans initially destined for Olam and Barry Callebaut to other clients, people familiar with the matter have said. The request comes after the two traders refused to pay more than the price set by the regulator, the people said.
The situation underscores that “structural output challenges in the West African cocoa market will continue to disrupt operations for chocolate makers through 2025,” Bloomberg Intelligence analysts Ignacio Canals Polo and Diana Gomes wrote in a note.
–With assistance from Dayanne Sousa.
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