Cocoa plunges into dark times as prices hit 4-year lows

Cocoa prices

Cocoa prices are in misery, hitting a four-year low due to an abundant supply and weakening demand as growing health consciousness grips consumers.

Benchmark cocoa futures on the Intercontinental Exchange in New York hit $2,052 per metric ton on February 3, the lowest level since March 2013, in an extended year-long decline after 2015's weather-related rally. They closed at $2,052 per ton on Friday.

A bumper crop last season from benign weather in West Africa is weighing down prices. Ivory Coast and Ghana are the world's top producers of cocoa beans, accounting for more than two-thirds of global supply.

Singapore-based Phillip Futures soft commodities dealer, Wilfred Chong said ICE cocoa may fall further, pegging support at $2,000 a ton.

Weight-conscious consumers are also cutting down on snacking causing demand fundamentals to fall as well.

In the U.S., which is the world largest chocolate market, retail sales of chocolate candy have seen little growth in the last two years. Sales by volume increased by just 0.6 percent in 2016 while sales by value were up 0.7 percent to $13.7 billion in the year up to December 25, according to data from Chicago-based market research firm IRI.

In 2015, volume sales fell 2.8 percent while dollar sales were up 3 percent to $13.6 billion, said IRI.

Annual cocoa production is about 4 million tons and many traders are expecting a supply surplus this year. The ICCO will release its projections for the current cocoa year later this month.

In China, retail volumes of chocolate likely fell 4 percent to 122,000 tons in 2016. Market research firm Euromonitor associated this decline to a growing awareness about health, a slowdown in discretionary spending, and only marginal product innovation.

All is not bad news, however, as consumers are still eating chocolate, just higher quality products.

"Whilst consumers are still looking to indulge, they are also increasingly concerned with eating better," according to Euromonitor analysts.


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