A recent survey conducted by Bloomberg has revealed that cocoa processing in Asia and Europe during the third quarter surpassed expectations, indicating a potential recovery in demand as lower bean costs enhance processing margins. This resurgence comes after a period of historically high cocoa prices, which led to a decrease in consumer demand.
In the third quarter, Asian cocoa processing surged by 29%, reaching its highest quarterly level since 2011, according to the Cocoa Association of Asia. Meanwhile, in Europe, cocoa grindings increased by 3.2% compared to the previous year, marking the region’s first quarterly year-on-year growth since 2024, as reported by the European Cocoa Association.
New York cocoa futures rose by 0.5% on Thursday, reaching around $5,762 per ton, which is approximately 157% higher than this year’s low of $2,243. Despite this increase, prices still remain more than 50% below the levels of $12,000 seen during the peak of the cocoa shortage in late 2024.
“The market was already showing a bullish trend, and this development will further boost market sentiment,” said Daryl Kryst, senior vice president of OTC commodities at StoneX, emphasizing that weather and supply risks in West Africa continue to pose challenges.
Several chocolate stocks have experienced a rally in the past five days, with Nestlé and Barry Callebaut leading the way with a 6.62% and 6.60% increase, respectively. Mondelez saw a gain of 5.71%, Lindt rose by 5.38%, and Hershey added 3.61%.
“Some chocolate companies have expressed their intention to rebuild volume sales and focus on volume growth,” stated Rabobank analyst Oran van Dort. “The increase in European grindings could be a preparatory step towards achieving that goal.”
The decline in bean prices this year has led to improved margins and increased activity, following the price spike in 2024 that forced chocolate manufacturers to adjust their recipes due to expensive cocoa. However, CoBank economist Billy Roberts pointed out that the rebound partly reflects weak comparisons from previous declines.
While processing activity has strengthened, a sustainable recovery in chocolate demand is yet to be seen. A significant test will be the upcoming “October/Halloween” period, highlighted by Deutsche Bank consumer staples analyst Steve Powers as a crucial indicator of demand for Hershey.
“September consumption and share trends were weaker than anticipated, underscoring the importance of the October/Halloween performance in assessing both short-term holiday prospects and the validity of HSY’s projected volume/share growth into FY27,” Powers noted in a recent report.