Cocoa: Tighter Inventories Suggest Market Growth by 2028 at 5.3% CAGR

Valentine’s Day is a good occasion to analyze cocoa futures. Cocoa prices on Monday, February 13, posted notable gains, with New York Mercantile Exchange (NYMEX) cocoa climbing to a 2-week-high. Stronger global cocoa demand boosted prices after Gepex, a cocoa exporter group that includes 6 of the world's biggest cocoa grinders, reported it processed 58,554 tons of cocoa in December, up +13% YoY. However, the latest data shows the North American cocoa grind, a measure of demand, fell 8.13% YoY in Q4, suggesting cocoa prices will remain elevated for at least the next 3-to-4 months.

Cocoa beans are the key ingredient in many culinary delights, as they are used to make all types of sweets and candies, ranging from hot cocoa, chocolate bars, brownies, and praline bites. So the market for cocoa-made processed foods is as immense as one stemming from another widely used soft commodity, coffee.

Cocoa is increasingly used in the production of a variety of beverages and confectionery products, including milkshakes, cakes, croissants, and hot cocoa. The influx of cocoa-based confectionery has increased tremendously in developed and developing countries over the past few years due to increased consumer spending on various taste confections. In addition, leading manufacturers are adding new types of chocolate to their lineups, including dark and ruby chocolates. In February 2022, the world’s most famous chocolate maker Hershey's, created a limited edition cocoa-based bar, “Celebrate SHE”, to address all female shoppers. The brand highlighted “SHE” in the center of the milk cocoa-based bar. Launching these innovative cocoa-based confections will further accelerate the market growth of cocoa derivatives.

According to Insight Partners' analysis of cocoa derivatives, the world's sweet tooth continues to drive demand for the commodity. Finance. Yahoo's website published a prominent article on the matter, suggesting the cocoa derivatives market size will be worth $37.79 Billion globally, growing by 2028 at 5.3% CAGR.

The market for cocoa derivatives can be divided into four types: cocoa butter, cocoa beans, cocoa powder, and other types of cocoa-containing foods. In 2022, the cocoa beans segment occupied the most market share. The forecast period will see the highest CAGR for the cocoa powder segment. 

Meanwhile, European cocoa futures are trading around $2,600 per tonne, near the 11-month high of $2,690, as investors weighed supply concerns against lower demand. Above-average rain in most of the Ivory Coast’s, by far the single biggest world’s cocoa grower and packager, cocoa regions will boost the April-to-September mid-crop after a long period of dry weather. 

The world’s top cocoa producing countries for 2021-22 were (per 1,000 metric tonnes):

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Ivory Coast – 2,200; Ghana – 822; Ecuador – 370; Cameroon – 280; Nigeria – 280.

Summary:

Tighter cocoa inventories are supportive of prices. ICE-monitored NY cocoa inventories held in U.S. ports are moderately above the 9.5 month low from January 3. Also, ICE-monitored cocoa stockpiles held in EU ports fell to a 10-month low Monday of 112,820 Megatons (MT).  

Also, on the positive side for cocoa are smaller cocoa exports from Nigeria after the Cocoa Association of Nigeria reported on January 24 that Nigeria's Dec cocoa exports fell 0.7% MoM and a whopping 73% YoY to 36,571 MT. Nigeria is the world's fifth-largest cocoa bean producer.

Written By: Pavan Parikh