On Tuesday, cocoa futures prices plummeted as Maxar Technologies forecasted favorable weather conditions in West Africa over the next week.
US cocoa contracts prices decreased by -2.77% to $7,788.00 per metric ton (MT) in the Asian afternoon session on August 27.
Following the British pound rally, the commodity extended its losses in London, leading to a 2-1/3 year high. Strength in the currency undercuts the price of chocolate-making ingredients in sterling.
Furthermore, higher cocoa production by Cameroon, one of the plant’s most prominent producers, pulled down its prices. Its National Cocoa and Coffee Board stated that the 2023/24 harvest increased by 1.20% year over year (YoY).
It previously rallied, hitting a two-month high amid concerns about arid conditions in West Africa that can damage production. The European Cocoa Association’s report mentioned that Q2 European grinding rose by 4.10% YoY to 357,502 MT compared to the -2.00% drop.
Another bullish factor is the weaker production on the Ivory Coast, which boosts the bean’s prices. According to government data, the coast’s farmers delivered 1.68 million metric tons of the crop, 28.00% lower than last year.
Last week, weather forecasters reported that the top cocoa producers, such as Ivory Coast and Ghana, lacked shower activity. As a result, the lower-than-average soil moisture limited the plant’s growth.
Hershey’s Struggles with Cocoa Inflation
According to Citigroup, Hershey’s profit margins face a challenge as its pricing strategy for 2025 lacks impact. It stated that the company might fail to offset the inflated cocoa prices.
They added that the cost increase and elasticity might challenge the firm, mainly if its rival does not match its higher prices.
Due to Hershey’s plans’ expected lack of impact, Citigroup downgraded it to Sell from Neutral, lowering it by 7.00% to $182.00 apiece. The challenges driven by cocoa prices led to a 7.00% slide.
