Cocoa Processing Reaches Lowest Point in Two Years as Chocolatiers Face Difficulties

Cocoa grindings across Europe and Asia experienced a decline in the final three months of 2024, signaling that chocolate producers are facing challenges due to soaring prices and dwindling inventories.

Data released on Thursday indicated a 5.4% drop in bean processing in Europe and a slight decrease of 0.5% in Asia compared to a year prior. The grindings for the fourth quarter in both regions were the lowest recorded since 2020, when the chocolate industry was impacted by Covid-19 lockdowns and trade interruptions.

The reduction in both areas “indicates that demand isn’t particularly strong,” commented Steve Wateridge, head of research at TRS by Expana. “Given the current price levels, this should not come as a surprise.”

Cocoa futures in New York saw a decline of up to 3.4% on Thursday, while the most-active contracts in London dropped as much as 2.8%.

Cocoa prices nearly tripled last year, making cocoa the best-performing major commodity, as ongoing supply shortages in Ivory Coast and Ghana, the leading global producers, led to an unprecedented supply deficit. Consequently, chocolate manufacturers have reduced their cocoa usage in products, all while utilizing stockpiles to satisfy the continuous demand for chocolate.

The most recent reports reveal that total grindings in Europe, the largest consuming market globally, have declined for the second consecutive year. In contrast, Asia’s overall grindings for 2024 saw a small uptick. Data from North America, released after market hours on Thursday, indicated a year-over-year drop of 1.2% in grindings.

While grind data — which reflects the process of turning cocoa into butter and powder used in various products from candy bars to ice cream — has traditionally been a barometer of demand, the tight supply conditions have weakened this correlation. Nevertheless, markets are attentively monitoring these figures in expectation of an even steeper decline as chocolate producers navigate the costly challenge of replenishing stockpiles.

Prices:
Cocoa prices decreased 2.9% to $10,502 per ton in New York, while London cocoa fell 2.5% Raw sugar increased 2.2% to 18.41 cents per pound, whereas arabica coffee declined 1.0% in New York

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