Why Cocoa Just Got Hammered: Tariffs, Supply Shock, and Weak Demand

Cocoa futures are tanking today—ICE NY December contract dropped 0.62%, London cocoa slid 1.47%. What triggered the selloff? Trump’s tariff cut just took a sledgehammer to prices.

The Tariff Plot Twist

Friday’s announcement to slash 10% reciprocal tariffs on non-US commodities (including cocoa) spooked traders into selling. BUT here’s the catch: Brazilian cocoa still faces a brutal 40% national-security tariff, and Brazil is the world’s #5 producer. So the relief is mostly theater for West African supply.

The Real Problem: Supply Tsunami

This is where it gets interesting. Ivory Coast (world’s largest cocoa producer) just shipped 516,787 MT in the first 6 weeks of the new season—down 5.7% y/y on paper, but farmers are OPTIMISTIC. Mondelez flagged cocoa pod counts in West Africa running 7% above the 5-year average and “materially higher” than last year. Translation: bumper crop incoming.

Ghana’s also reporting favorable weather that’s accelerating pod development. Translation again: supply is about to flood the market.

Demand Side? Brutal

Hershey’s CEO admitted Halloween chocolate sales were “disappointing”—and Halloween accounts for nearly 18% of annual US candy sales. Meanwhile:

• Asia Q3 cocoa grindings: down 17% y/y (smallest in 9 years)
• Europe Q3 cocoa grindings: down 4.8% y/y (worst in 10 years)
• North America chocolate sales: down 21% y/y in the 13 weeks ending Sept 7

The chocolate industry is basically admitting demand sucks right now.

The Silver Lining? Thin

ICE cocoa inventories hit a 7.75-month low (1.77M bags), and Nigeria’s cocoa production is projected to drop 11% y/y to 305,000 MT next season. Nice, but not enough to offset the West African boom and slashed demand.

The Bottom Line

Cocoa’s stuck in a classic squeeze: supply ramping up, demand cooling, and now tariff relief pressure too. ICCO projects a 142,000 MT surplus for 2024/25 (first in 4 years), and global production jumped 7.8% y/y. Unless something breaks the demand trend, cocoa traders should brace for more downside.