Cocoa Prices Plunge on Robust Supplies Amid Weak Demand

Cocoa futures tumbled to 1.75‑year lows—December ICE New York down 5.74% (-302) and London down 5.87% (-238)—after reports of a bumper West African crop (Mondelez pod counts 7% above the five‑year average) and the removal of 10% reciprocal tariffs on non‑US commodities, including cocoa. Weak demand compounded the selloff: Q3 Asia grindings fell 17% y/y, European grindings were down 4.8% and North American chocolate volumes showed significant weakness, with Hershey calling Halloween sales disappointing, even as some supply-side factors are supportive (Ivory Coast shipments through Nov. 16 at 516,787 MT, down 5.7% y/y; ICE‑monitored US port stocks at an eight‑month low of 1,747,459 bags; Nigeria projected to cut output ~11% y/y). The International Cocoa Organization’s revision — a large 2023/24 deficit but a projected 2024/25 surplus of 142,000 MT with global production rising 7.8% to 4.84 MMT — leaves the near‑term outlook mixed, with abundant West African pod counts and weak demand driving near‑term price weakness while tighter stocks and regional export dynamics could underpin prices later.

Analysis

December ICE New York cocoa (CCZ25) fell to 1.75-year lows, sliding -302 ticks (-5.74%) while London December (CAZ25) dropped -238 ticks (-5.87%), driven by reports of a bumper West African crop and favorable weather. Mondelez reported a West Africa pod count 7% above the five-year average and farmers in Ivory Coast and Ghana described healthy trees and drying conditions as harvest begins, creating near-term supply pressure.

Demand data and policy changes amplified the selloff: the Trump administration removed a 10% reciprocal tariff on non-US commodities including cocoa, Asia Q3 grindings fell -17% y/y to 183,413 MT, European Q3 grindings declined -4.8% y/y to 337,353 MT, and North American chocolate volumes showed material weakness with Halloween sales described as "disappointing" and US candy volume down more than -21% in the 13 weeks ending Sept. 7.

Supply-side nuances leave a mixed mid-term picture: Ivory Coast shipments from Oct.1–Nov.16 were 516,787 MT, down -5.7% y/y, ICE-monitored US port stocks hit an eight-month low at 1,747,459 bags, Nigeria projects 2025/26 output down -11% to 305,000 MT, and ICCO revised 2023/24 to a -494,000 MT deficit but forecasts a 2024/25 surplus of 142,000 MT with production up 7.8% to 4.84 MMT, implying near-term bearishness but potential episodic support if exports or inventories tighten further.

Key Decisions for Investors

• Reduce near-dated long exposure or hedge existing long cocoa futures positions given the sharp price decline, abundant West African pod counts and tariff removal that favor further near-term downside
• Monitor Ivory Coast weekly shipment data and ICE-monitored inventory levels as key signals to re-enter longs if shipments continue to lag and inventories fall further, use sustained declines in shipments or a resumed inventory drawdown as a technical/ fundamental buy trigger
• Avoid increasing direct exposure to confectioner equities on demand weakness; prefer companies with diversification or pricing power and consider short-dated protective hedges for names like Hershey given reported disappointing seasonal sales
• If seeking upside, favor selectively structured long-dated call options or calendar spreads rather than outright futures to limit near-term downside from continued bearish crop and demand headlines