Tariff Reductions and Weak Demand Undercut Cocoa Market Recovery

Cocoa futures encountered significant headwinds this week, with December NY ICE cocoa falling 33 points (-0.62%) and December London ICE cocoa declining 60 points (-1.47%). The decline stems from multiple converging factors, with the Trump administration’s announcement to reduce reciprocal tariffs on non-US-grown commodities—including cocoa—playing a central role in undermining prices.

Policy Impact Weighs on Sentiment

The 10% tariff reduction on commodity imports represents a mixed signal for cocoa suppliers. While the measure benefits producers exporting to the US, Brazilian cocoa exports remain subject to a 40% national-security tariff, limiting the immediate positive impact for the world’s fifth-largest cocoa producer in 2023. This partial relief appears insufficient to counteract broader market pressures.

Demand Destruction Accelerates Decline

Weak global consumption is a primary driver of cocoa’s underperformance. Chocolate manufacturer Hershey recently disclosed disappointing sales during the critical Halloween season, which accounted for nearly 18% of annual US candy sales in 2024, second only to Christmas. The signal is reinforced by grinding data across major regions:

• Asia: Q3 cocoa grindings fell 17% year-over-year to 183,413 MT, marking the lowest quarterly crush in nine years
• Europe: Q3 grindings declined 4.8% to 337,353 MT, representing a 10-year low for the third quarter
• North America: Sales volume of chocolate candy plunged over 21% in the 13 weeks ending September 7

The North American grinding data showed a 3.2% increase to 112,784 MT, but this figure is distorted by new reporting entities.

Supply Dynamics Present Mixed Signals

The Ivory Coast, accounting for the largest global cocoa share, faces an abundant harvest environment. From October 1 through November 16, 516,787 MT of cocoa reached ports—a 5.7% decline from the prior year’s 548,494 MT. However, optimistic farmer commentary and favorable growing conditions suggest robust production quality. Chocolate manufacturer Mondelez reported that West African cocoa pod counts are 7% above the five-year average and “materially higher” than last season.

Conversely, Nigeria, the world’s fifth-largest producer, projects a concerning 11% production decline for 2025/26 to 305,000 MT. September cocoa exports remained flat year-over-year at 14,511 MT.

Inventory Tightness Offers Limited Support

Despite demand weakness, cocoa inventory conditions provide modest price support. ICE-monitored stocks at US ports fell to a 7.75-month low of 1,766,644 bags on Friday. The International Cocoa Organization previously flagged a 494,000 MT deficit for 2023/24—the largest in over 60 years—pushing the stocks-to-grindings ratio to a 46-year nadir of 27.0%.

For 2024/25, ICCO projects a 142,000 MT global surplus, marking the first surplus in four years, with global production rising 7.8% to 4.84 MMT. This surplus outlook undercuts price recovery potential despite inventory pressures.

The convergence of tariff reductions, demand destruction across major consuming regions, and record production estimates has created a challenging backdrop for cocoa price appreciation in the near term.