The resiliency of cocoa demand shone through powerfully in cocoa bean grind data in the never dull global cocoa market. Cocoa bean futures, meanwhile, remain volatile, surging about 10% on July 22 after more than tripling from a year ago to a price peak in April.

Cocoa bean grind is viewed as a measure of cocoa and chocolate demand.

Second-quarter cocoa bean grind numbers exceeded expectations in most regions. Analysts surmised from the data that demand was stronger than expected despite recent record-high cocoa prices, and/or that not all the price increases had yet trickled down to the consumer level.

Cocoa grind in the three major regions (Europe, Asia and North America) totaled 673,251 tonnes, up 2% from the second quarter of 2023. Individually, grind was up 4.1% from a year ago in Europe, down 1.4% in Asia and up 2.2% in North America.

“The latest regional cocoa grinding data for Q2 suggests that demand for cocoa has remained resilient despite the record high prices reached in (the first half),” according to BMI, a unit of Fitch Solutions. “The surge in cocoa grinding volumes has defied market expectations, which were forecasting decreases in demand in response to the upward pressure on cocoa prices throughout the (first half of) 2024.”

Some suggested the better-than-expected grind data indicated fear of future shortages and increased use of 2023 stocks. Others suggested the shortage argument was counter to forecasts that cocoa bean production and supplies will increase in 2025, thus indicating strong demand.

Still others proposed the increase in European grind was the result of a shift from origin countries (grind was down sharply in top producer Ivory Coast) to consuming regions amid restrictions on grind in the Ivory Coast due to supply issues.

Swiss chocolate maker Lindt & Sprungli on July 23 reported first-half sales of $2.43 billion, in line with trade expectations, as price increases in the mid-single-digit range contributed to 7% sales growth. Volume was up 0.9%. The company affirmed its full-year sales growth outlook between 6% and 8% was confirmed. At the same time, Lindt said it would have to raise prices of its chocolate products further due to high cocoa prices.

The cocoa crises clearly is one of supply. Sharply lower production in West Africa, predominantly in Ivory Coast and Ghana, the world’s two largest producers with about 60% of global market share, is forecast down at least 30% from 2022-23, resulting in a third consecutive year of a global cocoa deficit, forecast by the International Cocoa Organization at 439,000 tonnes in 2023-24. The decrease has been attributed to adverse weather, swollen shoot disease, loss of farmland to mining and Europe’s environmental efforts that have disrupted farmers’ typical practice of planting trees in new areas to control diseases. Further alarming the market has been a failure to deliver about 500,000 tonnes of cocoa beans by the Ivory Coast and Ghana, with deliveries delayed until 2024-25, when production is expected to increase. The delays in Ghana were said to have cost traders up to $1 billion as they had to liquidate short positions in a rising market. The shipments have been pushed into 2024-25, which may have ramifications for next year’s supplies as well.

More favorable weather and increased use of chemicals to control disease are expected to result in a significant increase in production in 2024-25, although some analysts doubt that production will recover significantly so quickly.

Futures prices more than tripled from a year ago, peaking in late April. Prices have since dropped about 30% (in the spot position) but remain more than double year-ago values. Prices have been volatile much of this year because of low liquidity in the futures market. Daily price swings of 5% are common, with values moving as much as 10% on given days.

The cocoa market story will continue to develop in the coming weeks and months as West Africa partially recovers from adverse weather and crop disease in 2024-25. But larger structural changes to the industry, such as diversifying production from West Africa (where 70% of global supply originates in four countries), to other countries in Central and South America and Asia will take years to fully unfold.