Cocoa Prices Plummet on the Outlook for Robust Global Supplies

ICE cocoa futures plunged about 6% to 1.75‑year lows after EU nations pushed for a one‑year delay to the EU Deforestation Regulation, a move that eases near‑term supply constraints, and as expectations of a larger West African crop (Mondelez pod count 7% above the five‑year average) and the U.S. removal of a 10% reciprocal tariff on non‑U.S. commodities weighed on prices. Weak demand data — Q3 Asia grindings -17% y/y, Europe -4.8%, disappointing seasonal chocolate sales and North American chocolate volumes down >21% in recent weeks — amplified the downtrend, even as some supply factors are supportive (Ivory Coast early‑season shipments down 5.7% y/y to 516,787 MT, ICE inventories at an eight‑month low of 1,740,127 bags and a projected 11% drop in Nigerian output for 2025/26). ICCO figures underscore the mixed picture: a large 2023/24 deficit of 494,000 MT but a forecast 2024/25 surplus of 142,000 MT (+7.8% production), leaving prices sensitive to near‑term crop and demand developments.

Analysis

Cocoa futures plunged roughly 6% to 1.75-year lows after EU nations pushed for a one-year delay to the EU Deforestation Regulation, easing near-term supply constraints; the move combined with the U.S. removal of a 10% reciprocal tariff and expectations of a larger West African crop drove the immediate selloff. Mondelez reported a cocoa pod count 7% above the five-year average and West African producers cited favorable weather, while ICCO projects 2024/25 global cocoa production up 7.8% to 4.84 MMT and a 142,000 MT surplus, all of which weigh on prices. Demand indicators are weak: Q3 Asia grindings fell 17% y/y to 183,413 MT, Europe grindings declined 4.8% y/y to 337,353 MT, North American grindings rose 3.2% but are data-skewed, and North American chocolate sales volumes have fallen over 21% in recent weeks; Hershey described Halloween sales as "disappointing." Offsetting bearish drivers, Ivory Coast early-season shipments are down 5.7% y/y to 516,787 MT and ICE inventories hit an eight-month low of 1,740,127 bags while Nigeria projects an 11% output decline for 2025/26, leaving prices highly sensitive to near-term crop, export and demand updates.

Key Decisions for Investors

• Avoid initiating sizeable long positions in cocoa futures or cocoa-centric commodity ETFs until clarity on EU EUDR timing and Q4 grindings/demand data emerges,
• Consider tactical short or put protection on cocoa exposure given immediate bearish catalysts (EUDR delay, tariff removal, strong West African pod counts),
• Monitor weekly Ivory Coast export statistics, ICE inventory levels and ICCO production revisions as primary triggers to re-assess positioning and potential mean-reversion opportunities,
• For processors and consumer staples exposure, hedge near-term cocoa price risk or trim cyclically exposed inventory given weak seasonal demand and mixed raw-material signals (Mondelez pod counts vs. Hershey sales disappointment)