Cocoa prices are lower on demand concerns following weak quarterly financial results from chocolate giant Hershey Co. (HSY) and snack company Mondelez International (MDLZ).
The price of cocoa trading in New York is down about 2% after Pennsylvania-based Hershey said that its chocolate sales in this year’s first quarter declined 14% and that it is bracing for a $20 million cost increase from import tariffs in the current second quarter. Hershey’s management team said they have no choice but to pass the cost increase onto consumers, hurting demand at a time when chocolate prices were already near record highs.
At the same time, Mondelez, the maker of Oreo cookies, reported weaker-than-expected first-quarter sales and said consumers are cutting back on snack purchases due to economic uncertainty and high chocolate prices. Cocoa prices are currently at $8,700 per ton, the lowest level since April 18 of this year. The price had been above $10,000 a ton to start the year. Cocoa is the main ingredient in chocolate.
Shortages of cocoa crops in Africa due to climate change and poor growing conditions had pushed prices to all-time highs at various points over the past 12 months. However, data now shows that the global supply of cocoa might finally be rebounding, helping to move prices lower. The latest market data shows that Nigerian cocoa exports rose 24% year-over-year to 27,564 metric tons in April. Nigeria is the world’s fifth-largest cocoa producer.
A rebound in cocoa shipments and inventories is bearish for prices, and, along with weakening consumer demand, are pushing prices downward. Cocoa inventories in U.S. ports are now at a six-month high, with deliveries also rising from the Ivory Coast in Africa. The International Cocoa Organization (ICCO) in February of this year forecast a global cocoa surplus of 142,000 metric tons for 2025, the first surplus in nearly five years.
HSY stock is down 2% on the year. Over the past 12 months, the stock has declined 14%.