The Current Situation
The global cocoa market is experiencing one of its most significant supply deficits in decades. For the 2023/24 season, the deficit reached approximately 400,000 metric tons, and early indications suggest 2024/25 could see a similar or larger shortfall.
Root Causes of the Deficit
1. Aging Tree Stock
One of the most critical structural issues facing cocoa production:
- Average tree age: 25+ years in key growing regions
- Optimal productivity: Trees peak at 15-20 years
- Replanting lag: New trees require 3-5 years to bear fruit
The lack of systematic replanting programs in previous decades is now manifesting in declining yields.
2. Climate Change Impacts
West African cocoa regions are experiencing:
- Shifting rainfall patterns: More erratic precipitation affecting flowering and pod development
- Temperature increases: Higher average temperatures stressing trees
- Disease pressure: Favorable conditions for swollen shoot virus and black pod disease
3. Farmer Economics
Smallholder farmers face challenging economics:
- Low farmgate prices relative to global inflation
- Rising input costs for fertilizers and pesticides
- Labor shortages as younger generations seek urban opportunities
- Limited access to credit for farm improvements
Country-by-Country Analysis
Ivory Coast (World’s Largest Producer)
- 2023/24 production: ~2.0 million tonnes (down from 2.2M)
- 2024/25 forecast: 1.85-1.95 million tonnes
- Key challenges: Aging orchards, swollen shoot disease
Ghana
- 2023/24 production: ~650,000 tonnes
- 2024/25 forecast: 600-650,000 tonnes
- COCOBOD reforms underway but implementation slow
Ecuador
- Emerging as a quality-focused origin
- Production growing but from a small base
- Focus on fine flavor varieties
Global Stocks Analysis
Total Global Stocks
| Season | Ending Stocks (MT) | Stocks-to-Use Ratio |
|---|---|---|
| 2021/22 | 1,892,000 | 38.2% |
| 2022/23 | 1,654,000 | 33.1% |
| 2023/24 | 1,248,000 | 25.4% |
| 2024/25F | 980,000 | 19.8% |
The projected stocks-to-use ratio for 2024/25 would be the lowest in over 45 years.
Certified Stocks
ICE certified stocks have also declined significantly:
- Current: ~2.1 million bags
- 5-year average: 4.8 million bags
- The premium for certified cocoa has expanded materially
Demand Side Considerations
Will High Prices Destroy Demand?
Historical evidence suggests cocoa demand is relatively inelastic:
- Chocolate is affordable luxury — consumers tend to maintain consumption even during economic stress
- Substitution is limited — no true substitute for cocoa flavor
- Industry adaptation — manufacturers adjust product sizing and formulations
However, sustained prices above $5,000/tonne could begin to impact:
- Confectionery use in price-sensitive markets
- Industrial applications (cosmetics, food processing)
Implications for Traders
Price Outlook
Based on our supply-demand model, we project:
- Base case: Prices remain elevated ($4,500-5,500 range) through 2025
- Bull case: Supply deterioration pushes prices toward $6,000+
- Bear case: Demand destruction limits upside to $5,000
Key Metrics to Watch
- Weekly West African arrivals data
- European grinding figures (quarterly)
- Certified stock movements
- Managed money positioning
Trading Considerations
- Expect continued volatility
- Backwardation likely to persist
- Options premiums remain elevated
Long-Term Outlook
Addressing the supply deficit requires:
- Replanting initiatives — Multi-year programs to replace aging trees
- Yield improvements — Better agronomic practices and inputs
- Price signals — Sustained higher farmgate prices to incentivize production
- Climate adaptation — Development of more resilient varieties
Realistically, meaningful supply response is 3-5 years away at minimum.
This analysis is for informational purposes only and does not constitute investment advice.