Global Cocoa Markets Face Headwinds as Policy Delays Ease Supply Concerns

Cocoa futures retreated on Wednesday as the European Parliament’s approval of a one-year postponement of the EU Deforestation Regulation (EUDR) eased concerns over supply constraints. March contracts on ICE New York dipped 0.12% while December London futures slid 0.27%, yet both maintained ground above the 1.75-year lows recorded the previous week.

Policy Shift Redirects Global Trade Flows

The EUDR postponement represents a significant development for cocoa markets. Originally designed to restrict imports of commodities linked to deforestation—including cocoa from major producing regions—the delay extends EU approval processes and maintains access to agricultural products from key growing zones across Africa, Indonesia, and South America. This regulatory reprieve has bolstered supply availability expectations across major consuming nations.

West African Harvest Outlook Pressures Prices

Production fundamentals are weighing on the market. Where does cocoa grow? The lion’s share originates from West Africa, particularly Ivory Coast and Ghana, regions currently experiencing favorable conditions. Farmers in these areas report robust tree health and optimal drying conditions following dry weather patterns. Chocolate manufacturer Mondelez noted that current West African pod counts stand 7% above the five-year historical average and substantially exceed last year’s volumes. Ivory Coast’s main harvest cycle has commenced with farmer sentiment decidedly optimistic regarding crop quality.

Tariff Reversals and Demand Weakness Compound Pressure

In November, the Trump administration eliminated the 10% reciprocal tariff on non-domestically grown commodities, including cocoa, alongside the 40% levy on Brazilian food imports. Brazil ranks among global top-10 cocoa producers, making this policy reversal particularly relevant for price direction.

Demand indicators paint a concerning picture. Chocolate confectionery sales during the recent Halloween season disappointed major manufacturers like Hershey, with seasonal sales representing nearly 18% of annual US candy revenue. Processing data underscores this weakness: Asian cocoa grindings contracted 17% year-over-year in Q3 to 183,413 MT—a nine-year quarterly low—while European grindings fell 4.8% year-over-year to 337,353 MT, marking a decade low for third-quarter processing.

Supply Dynamics: Mixed Signals

Ivory Coast port receipts totaled 618,899 MT from October 1 through November 23, representing a 3.7% decline versus the same period last year, though the nation maintains its position as the world’s largest cocoa producer. Conversely, ICE-monitored US port inventories fell to 1,709,185 bags—an 8.5-month low—offering modest price support.

Nigeria, the fifth-largest producer globally, presents a bearish supply picture. The Nigerian Cocoa Association forecasts 2025/26 production will contract 11% year-over-year to 305,000 MT from the prior season’s projected 344,000 MT.

Market Equilibrium Shifts Toward Surplus

The International Cocoa Organization’s latest assessments reveal a turning point. The 2023/24 season recorded a deficit of 494,000 MT—the largest in over 60 years—as production fell 13.1% to 4.380 million MT. However, 2024/25 projections indicate an estimated surplus of 142,000 MT, the first surplus in four years, supported by production growth of 7.8% to 4.84 million MT. This surplus emergence follows a record-low stocks-to-grindings ratio of 27.0% in the prior season.

The convergence of oversupply expectations, regulatory delays enhancing import accessibility, and subdued global chocolate demand has established a bearish near-term backdrop for cocoa valuations, despite supportive inventory drawdowns in distribution centers.