EU food price inflation cooled in October to 2.5% year-over-year, but chocolate inflation remained at very high levels, falling only slightly from 17.9% to 17.3% year-over-year, limiting scope for demand recovery.
Annualized inflation for both confectionery products and cocoa and powdered chocolate increased slightly to remain at multi-year highs. At these levels, it is hard to see scope for demand from consumers increasing, with holiday sales data likely to confirm this.
Cocoa mass and cocoa butter prices have followed beans lower, although cocoa powder remains quite stable, sticking to the 7,600 EUR/t level. Ratios remain stable, with cocoa butter currently at 2.0x the price of cocoa mass.
Despite cocoa prices falling through the 4,000 GBP/t barrier with relative ease to approach the next psychological support level of 3,500 GBP/t, the market is reading as oversold based on underlying fundamentals. There could be an early tail to the main crop, and funds are quite heavily positioned short.
West Africa differentials have fallen substantially after holding at relatively high levels. Ivory Coast differentials are down 30% since late October, seen stabilizing around 800 EUR/t, with some small gains possible from here. Ghanaian differentials dropped to levels of 1,600 EUR/t.
For the full cocoa market analysis, go to: https://app.vespertool.com/market-analysis/2478