Cocoa Prices Drop as Stronger Dollar and Pound Pressure the Market

Cocoa prices slipped on Thursday, dragged down by renewed strength in the U.S. Dollar and British Pound. The Dollar Index bounced off a five-week low, weighing on New York cocoa futures, while London cocoa faced selling pressure as the pound climbed to its strongest level in weeks.

Because cocoa is priced in these currencies, a stronger dollar or pound typically makes contracts more expensive for international buyers, reducing demand.

West African Weather Improves, Boosting Supply Expectations

Weather conditions across Ivory Coast and Ghana continue to support cocoa production, adding downward pressure on prices. Farmers in both regions report that a healthy mix of rainfall and sunshine is helping cocoa trees produce blossoms and pods ahead of the Harmattan season.

Earlier this week, cocoa prices briefly rallied after the International Cocoa Organization (ICCO) cut its projected global surplus for 2024/25 from 142,000 MT to 49,000 MT, and lowered production expectations from 4.84 million MT to 4.69 million MT.

Port arrival data supports the picture of a slower harvest flow. Ivory Coast shipments reached 718,451 MT from October 1 to November 30—down 2.1% compared to the same period last year.

Inventories Dip, but Market Still Expects Ample Supply

ICE-monitored cocoa inventories in U.S. ports fell to an 8.5-month low of 1.68 million bags, offering mild support. However, the broader market outlook is still weighed down by expectations of a strong harvest in West Africa.

Reports from farmers indicate healthy pod development, supported by favorable weather. Mondelez’s latest survey of cocoa pod counts also shows a reading 7% above the five-year average, signaling that the upcoming harvest could be solid.

Adding to this, the European Parliament’s one-year delay of its deforestation regulation (EUDR) means European buyers can continue sourcing cocoa from regions still linked with deforestation. This delay avoids short-term supply disruptions and helps keep cocoa flowing from Africa and South America.

The U.S. government also recently removed certain tariffs on cocoa imports, increasing access to foreign supply and further limiting any bullish price momentum.

Weak Chocolate Demand Adds Bearish Pressure

Demand remains one of the weakest points in the cocoa market. Hershey recently reported disappointing Halloween chocolate sales, despite the holiday accounting for nearly 18% of yearly U.S. candy purchases.

Key demand indicators continue to show softness:

• Asia Q3 cocoa grindings: down 17% (a nine-year low)
• Europe Q3 grindings: down 4.8% (lowest in 10 years)
• North America Q3 grindings: up 3.2%, but boosted by newly added reporting companies
• U.S. chocolate candy sales: down 21% over the past 13 weeks

Weak grinding numbers signal declining demand from chocolate manufacturers, adding more downward pressure on prices.

Nigeria’s Drop in Output Offers Limited Support

Nigeria, the fifth-largest cocoa producer, is expecting an 11% decline in cocoa output for the 2025/26 season. Production is set to fall from 344,000 MT to 305,000 MT, according to the Nigerian Cocoa Association. While this decline provides some support, it is not enough to counterbalance strong crop expectations in Ivory Coast and Ghana.

The ICCO recently reported a record 494,000 MT global deficit for 2023/24, the largest in more than 60 years. However, for 2024/25, the organization now expects a small surplus of 49,000 MT, which shifts the overall sentiment back toward excess supply.

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