Cocoa Prices Weighed Down as Global Supply Prospects Improve

Cocoa futures plunged Friday—March ICE NY down 123 ticks (-2.33%) and December London down 97 (-2.50%), with London hitting a 1.75‑year low—after a wave of bearish catalysts: EU ministers proposed a one‑year delay to the EUDR (easing import restrictions), reports of a stronger West African crop (Mondelez pod counts +7% vs. five‑year average) and the US dropping reciprocal tariffs on non‑US commodities reduced supply concerns, while demand indicators were weak (Hershey called Halloween sales “disappointing,” Q3 grindings: Asia -17% y/y, Europe -4.8% y/y). Offsetting, but smaller, supportive factors include shrinking ICE‑monitored US port stocks (1,733,345 bags, an 8.25‑month low), early‑season slower Ivory Coast shipments (-5.7% y/y Oct 1–Nov 16) and a projected Nigerian output decline (-11% for 2025/26); ICCO data show a deep 2023/24 deficit (-494,000 MT) but forecast a 2024/25 surplus (+142,000 MT), leaving near‑term price pressure from demand and policy developments tempered by persistent structural supply risks.

Analysis

March ICE NY cocoa fell 123 ticks (-2.33%) and December London cocoa fell 97 ticks (-2.50%), with London touching a 1.75‑year low as markets reacted to a cluster of bearish catalysts including a proposed one‑year delay to the EU Deforestation Regulation (EUDR) that eases near‑term import restrictions. The U.S. decision to drop the 10% reciprocal tariffs on non‑U.S. commodities including cocoa further reduced immediate supply concerns and amplified selling pressure.

Supply signals are mixed: Mondelez reported West African pod counts 7% above the five‑year average and favorable weather, supporting expectations of a larger crop, while early‑season Ivory Coast shipments are down 5.7% y/y (516,787 MT Oct 1–Nov 16). Nigeria projects 2025/26 output down 11% y/y to 305,000 MT, and ICCO moved from a deep 2023/24 deficit (‑494,000 MT) to a forecast 2024/25 surplus (+142,000 MT) with production of 4.84 MMT (+7.8% y/y).

Demand and flow data are bearish: Hershey called Halloween sales “disappointing,” Asia Q3 grindings fell 17% y/y to 183,413 MT, Europe Q3 grindings fell 4.8% y/y to 337,353 MT, while North American Q3 grindings rose 3.2% to 112,784 MT but are data‑skewed. ICE‑monitored U.S. port stocks are supportive at a shorter 8.25‑month low of 1,733,345 bags, implying continued price volatility as bearish demand and policy news clash with structural supply risks; sentiment is moderately negative.

Key Decisions for Investors

• Reduce or hedge short‑dated long positions in cocoa futures given EUDR delay, stronger West African pod counts (+7% vs five‑year avg) and materially weak Q3 grindings in Asia (‑17%) and Europe (‑4.8%),
• Monitor near‑term catalysts — final EUDR timing, weekly Ivory Coast shipments, subsequent Mondelez pod‑count updates and ICCO supply revisions — and re‑assess positions when new crop/shipments data confirm trends,
• For cocoa‑consuming equities (e.g., Mondelez, Hershey), consider a cautious constructive stance on input‑cost relief from lower cocoa prices but hedge or await clearer demand signals after disappointing Halloween sales,
• Use tight risk management (stops or option protection) to guard against rebounds driven by low ICE‑monitored U.S. stocks (1,733,345 bags, 8.25‑month low) or unexpected export slowdowns.