September ICE NY cocoa (CCU25) on Tuesday fell -403 (-4.86%), and September ICE London cocoa #7 (CAU25) fell -153 (-2.85%).

Cocoa prices fell on demand concerns, after the Malaysian Cocoa Board and Cocoa Manufacturers Group reported on Tuesday that cocoa bean processing in Q2 fell by -22% y/y.  The market is looking ahead to the quarterly Q2 cocoa grinding reports that are expected on Thursday.  Cocoa grindings reports for Q1 were weak.  Q1 North American cocoa grindings fell -2.5% y/y to 110,278 MT, Q1 European cocoa grindings fell -3.7% y/y to 353,522 MT, and Q1 Asian cocoa grindings fell -3.4% y/y to 213,898 MT.

Cocoa prices also fell due to reports of favorable weather conditions in cocoa-growing areas in the Ivory Coast and Ghana, although the weather is less favorable in Nigeria and Cameroon.

Monday's government data showed that Ivory Coast farmers shipped 1.73 MMT of cocoa to ports this marketing year from October 1 to July 13, up +6.8% from last year but down from the much larger +35% increase seen in December.

Demand concerns are weighing on cocoa prices after chocolate maker Barry Callebaut AG reduced its sales volume guidance last Thursday for a second time in three months, citing persistently high cocoa prices.  The company projects a decline in full-year sales volume and said there was a -9.5% drop in its March-May sales volume, the largest quarterly drop in a decade.

Higher cocoa production by Ghana is bearish for cocoa prices.  On July 1, the Ghana Cocoa Board projected the 2025/26 Ghana cocoa crop would increase by +8.3% y/y to 650,000 from 600,000 MT in 2024/25.  Ghana is the world's second-largest cocoa producer.  

In a bearish factor, ICE-monitored cocoa inventories held in US ports climbed to a 10-month high of 2,363,861 bags on June 18 and were modestly below that high at 2,336,040 bags as of Tuesday.

Cocoa prices have support from quality concerns regarding the Ivory Coast's mid-crop cocoa, which is currently being harvested through September.  Cocoa processors are complaining about the quality of the crop and have rejected truckloads of Ivory Coast cocoa beans.  Processors reported that about 5% to 6% of the mid-crop cocoa in each truckload is of poor quality, compared with 1% during the main crop.  According to Rabobank, the poor quality of the Ivory Coast's mid-crop is partly attributed to late-arriving rain in the region, which limited crop growth.  The mid-crop is the smaller of the two annual cocoa harvests, which typically starts in April.  The average estimate for this year's Ivory Coast mid-crop is 400,000 MT, down -9% from last year's 440,000 MT.

On May 30, the International Cocoa Organization (ICCO) revised its 2023/24 global cocoa deficit to -494,000 MT from a February estimate of -441,000 MT, the largest deficit in over 60 years.  ICCO said 2023/24 cocoa production fell by 13.1% y/y to 4.380 MMT.  ICCO said the 2023/24 global cocoa stocks/grindings ratio fell to a 46-year low of 27.0%.  Looking ahead to 2024/25, ICCO on February 28 forecasted a global cocoa surplus of 142,000 MT for 2024/25, the first surplus in four years.  ICCO also projected that 2024/25 global cocoa production will rise +7.8% y/y to 4.84 MMT.