NY Cocoa Prices Sink on Possible US Tariff Reductions

December ICE NY cocoa (CCZ25) on Wednesday closed down -204 (-3.50%), and December ICE London cocoa #7 (CAZ25) closed up +17 (+0.41%).

Cocoa costs settled blended on Wednesday, with NY cocoa falling sharply to a 1.75-year nearest-futures low.   Indicators of potential tariff cuts weighed on cocoa costs after US Treasury Secretary Bessent mentioned Wednesday that there can be “substantial bulletins over the subsequent couple of days” on tariffs on crops not grown within the US, together with cocoa.  

Don’t Miss a Day: From crude oil to espresso, enroll free for Barchart’s best-in-class commodity evaluation.

Since posting 6-week highs final Tuesday, cocoa costs have retreated amid expectations of a bumper cocoa crop in West Africa.  Experiences from Ivory Coast cocoa farmers said that cocoa timber are doing nicely, and up to date dry climate helped harvested beans dry, whereas cocoa farmers in Ghana mentioned favorable climate is permitting cocoa pods to develop rapidly.  

Chocolate maker Mondelez not too long ago mentioned that the newest cocoa pod depend in West Africa is 7% above the five-year common and “materially larger” than final yr’s crop.  The harvest of the Ivory Coast’s principal crop has simply begun, and farmers are optimistic about its high quality.

Weak world cocoa demand is bearish for costs.  On October 30, the CEO of chocolate-maker Hershey mentioned chocolate gross sales this Halloween season have been “disappointing.”  Halloween made up almost 18% of annual US sweet gross sales in 2024, second solely to Christmas.  In the meantime, the Cocoa Affiliation of Asia on October 17 reported that Q3 Asia cocoa grindings fell by -17% y/y to 183,413, the smallest grindings for a Q3 in 9 years.  The European Cocoa Affiliation on October 16 reported that Q3 European cocoa grindings fell -4.8% y/y to 337,353 MT, the bottom for a 3rd quarter in 10 years.  The Nationwide Confectioners Affiliation reported that Q3 North American cocoa grindings rose +3.2% y/y to 112,784 MT, however the addition of latest reporting firms skewed the info.  In associated information, North American gross sales quantity of chocolate sweet was down greater than -21% within the 13 weeks ending September 7, in comparison with the identical interval final yr, in line with knowledge from analysis agency Circana.

Indicators of a slowdown in cocoa exports from the Ivory Coast, the world’s largest cocoa producer, are a constructive issue for costs.  Monday’s authorities knowledge confirmed that Ivory Coast farmers shipped 411,979 MT of cocoa to ports this new advertising yr, from October 1 by November 8, down -9% from 454,624 MT in the identical interval a yr in the past.

An excessively quick place by funds in London cocoa might gas any short-covering rally.  Final Friday’s weekly Dedication of Merchants (COT) report confirmed funds boosted their net-short positions in London cocoa by 3,746 within the week ended November 4, to 19,194, the best stage of quick positions in additional than 4 years.  There isn’t any present knowledge on positions in NY cocoa, because the US authorities is presently closed.

Final Tuesday, cocoa costs rallied to 6-week highs as short-covering emerged from information on October 30 that the administrator of the Bloomberg Commodity Index (BCOM) mentioned cocoa can be included within the index for the primary time in 2 many years, starting in January.  Property monitoring the BCOM index totaled virtually $109 billion on the finish of 2024, suggesting cocoa’s 1.7% weighting within the index might spur vital inflows into the market from passive funds that observe it.  In line with Peak Buying and selling Analysis LLC, “Funds should purchase about $1.9 billion in cocoa futures over the subsequent 80 days.”

Shrinking ICE cocoa inventories are supportive for cocoa costs.  ICE-monitored cocoa inventories held in US ports fell to a 7.5-month low of 1,783,757 luggage on Wednesday.

A supportive issue for cocoa is decrease cocoa manufacturing in Nigeria, the world’s fifth-largest cocoa producer.  Nigeria’s Cocoa Affiliation initiatives that Nigeria’s 2025/26 cocoa manufacturing will fall by -11% y/y to 305,000 MT from a projected 344,000 MT for the 2024/25 crop yr.  In associated information, Nigeria reported that its September cocoa exports have been unchanged y/y at 14,511 MT.  

On Might 30, the Worldwide Cocoa Group (ICCO) revised its 2023/24 world cocoa deficit to -494,000 MT, the most important deficit in over 60 years.  ICCO mentioned 2023/24 cocoa manufacturing fell by -13.1% y/y to 4.380 MMT.  ICCO said that the 2023/24 world cocoa stocks-to-grindings ratio declined to a 46-year low of 27.0%.  For 2024/25, ICCO estimated a world cocoa surplus of 142,000 MT, marking the primary surplus in 4 years.  ICCO additionally mentioned world cocoa manufacturing in 2024/25 rose by +7.8% y/y to 4.84 MMT. 

On the date of publication,

Wealthy Asplund

didn’t have (both straight or not directly) positions in any of the securities talked about on this article. All data and knowledge on this article is solely for informational functions.

For extra data please view the Barchart Disclosure Coverage

right here.

Extra information from Barchart

The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.