Cocoa futures continued their steep two-week decline on Tuesday, with March ICE New York cocoa falling 1.75% and London cocoa contracts down 1.38%. Prices London cocoa have now slipped to their lowest levels in nearly 18 months, pressured by a combination of improving crop expectations, easing regulatory risks, and weak global demand.
EU Set to Delay Deforestation Rules, Loosening Supply Constraints
A key catalyst behind the latest selloff is growing confidence that the European Union will postpone its Deforestation Regulation (EUDR) by one year. The measure – aimed at curbing imports tied to deforestation in countries such as Ivory Coast, Ghana, and Indonesia – was originally scheduled for implementation in late December.
With EU member states backing the delay and Parliament widely expected to approve it, traders anticipate fewer supply bottlenecks ahead. The postponement should allow uninterrupted imports of cocoa and other agricultural commodities from major producing regions.
West Africa Crop Outlook Improves
Expectations of strong upcoming harvests in West Africa, the world’s dominant cocoa-producing region, are further weighing on prices.
- Ivory Coast farmers report healthy cocoa trees and favourable drying conditions.
- Ghana growers note rapid pod development thanks to supportive weather.
Mondelez added to the optimism, highlighting that recent pod counts across West Africa are 7% above the five-year average and “materially higher” than last season. With Ivory Coast’s main crop harvest just getting underway, farmers remain upbeat about both volume and quality.
Additional Downside Forces: Tariff Relief & Soft Demand
Recent US policy changes are adding more pressure. The Trump administration removed planned 10% reciprocal tariffs on commodities not produced domestically—including cocoa—reducing cost pressures for US buyers.
Demand indicators, however, paint a weaker picture:
- Hershey described Halloween chocolate sales as “disappointing,” noteworthy given the season accounts for nearly 18% of US annual candy sales.
- Asia cocoa grindings dropped 17% year-on-year in Q3, the lowest for the quarter in nine years.
- Europe’s grindings fell 4.8%, a decade low.
- North America posted a 3.2% increase, though analysts note this was distorted by new reporting participants.
- Chocolate candy sales across North America plunged more than 21% over the 13 weeks ending Sept. 7, according to Circana.
Supply Tightness Still Present in Some Areas
Despite improving global supply prospects, there are pockets of tightness:
- Ivory Coast port arrivals since the start of the season (Oct 1–Nov 23) are down 3.7% year-on-year.
- ICE-monitored inventories in US ports have fallen to an eight-month low.
- Nigeria, the world’s fifth-largest producer, expects its 2025/26 output to drop 11% due to weaker harvest conditions.
Global Balances Turning, but Stocks Still Historically Low
The International Cocoa Organization (ICCO) recently updated its outlook:
- For 2023/24, the global cocoa deficit is estimated at -494,000 MT, the largest shortfall in more than six decades.
- Production fell 13.1% last season, pushing the global stocks-to-grindings ratio to a 46-year low.
- 2024/25, however, is expected to swing into a 142,000 MT surplus, the first surplus in four years, with production forecast to rise nearly 8%.
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