Cocoa Market Update
Today, March ICE NY Cocoa is up by 19 points, or about 0.37%, while December ICE London Cocoa #7 has increased by 12 points, which is approximately 0.33%.
After some initial losses this morning, cocoa prices began to recover, primarily due to the weaker dollar prompting short covering in cocoa futures.
The early drop in cocoa prices was a reaction to the European Parliament’s approval of a one-year extension on deforestation laws that help maintain a steady supply of cocoa. This regulation, referred to as the EUDR, aims to combat deforestation linked to commodities like cocoa and soy imported into the EU. This delay allows imports from affected regions in Africa, Indonesia, and South America to continue as deforestation issues persist there.
Additionally, prices were boosted by a dip in cocoa arrivals at ports in the Ivory Coast. Recent government figures indicate that farmers have exported 618,899 tonnes of cocoa from October 1 to November 23, which is a 3.7% drop from 642,500 tonnes during the same period last year. The Ivory Coast is noted as the top cocoa producer globally.
Moreover, declining cocoa stocks under ICE surveillance in U.S. ports, which dropped to an eight-month low of 1,710,455 bags, are also helping to bolster prices.
On the supply side, expectations of a strong cocoa crop in West Africa are adding downward pressure on prices. Farmers in the Ivory Coast reported that their trees are thriving, likely due to favorable drying conditions, while in Ghana, good weather is helping beans develop more quickly.
Interestingly, Mondelez recently shared that West Africa’s latest cocoa harvest is 7% above the five-year average and significantly better than last year’s yield. As the main harvest in the Ivory Coast begins, farmers are feeling hopeful about the quality of their crop.
However, cocoa prices faced a setback following the Trump administration’s announcement on November 14 regarding the removal of a 10% reciprocal tariff on non-U.S. imports, including cocoa, and a hefty 40% tariff on food from Brazil, a top cocoa producer.
A general bearish sentiment prevails in the market, fueled by weak global demand for cocoa. For instance, the CEO of Hershey noted that candy sales during the Halloween season were disappointing this year—traditionally a peak time for sales in the U.S. Meanwhile, a report from the Asia Cocoa Association indicated that cacao crushing in Asia fell by 17% year-on-year in the third quarter, marking the lowest volume seen in nine years. The European Cocoa Association echoed this, reporting a 4.8% drop in European cocoa crushing for the same period, also a decade-low. Although North American cocoa milling did see a slight increase of 3.2%, the addition of new companies to the reporting group may have skewed this data. Additionally, a recent study revealed North American chocolate candy sales plummeted by over 21% in the weeks leading up to September 7 compared to last year.
On another note, cocoa production in Nigeria, the fifth largest producer, is on the decline. The Cocoa Association of Nigeria now projects production for the 2025/26 year will hit 305,000 tonnes, an 11% decrease from the anticipated 344,000 tonnes for the 2024/25 season. September figures showed Nigeria’s cocoa exports remained stagnant at 14,511 tonnes year-on-year.
In broader terms, the International Cocoa Organization (ICCO) recently adjusted its outlook for a global cocoa deficit in 2023/24 to 494,000 tonnes—the highest shortfall recorded in over six decades. They report a 13.1% reduction in this year’s production, estimating it at 4.380 million metric tonnes. The stock-to-crush ratio is also at its lowest in 46 years at 27.0%. However, ICCO estimates that the global cocoa surplus for 2024/25 could be around 142,000 tonnes, signaling a potential recovery after four years of deficits, with production expected to rise by 7.8% to 4.84 million metric tonnes next year.
