EU Deforestation Rule Delay Floods Market with Cocoa as Demand Continues Sliding

West African cocoa farmers are gearing up for a bumper harvest just as global chocolate consumption shows signs of stalling. The optimism comes despite—or perhaps because of—the European Parliament’s decision this week to push back implementation of strict deforestation standards by a full year, opening the floodgates for cocoa imports from high-deforestation regions across Africa, Indonesia, and South America.

The math is brutal: chocolate makers worldwide are grinding less cocoa than they have in years. Asia’s Q3 cocoa processing plunged 17% year-over-year to hit the smallest third-quarter output in nine years, while Europe’s mills ran at their slowest pace in a decade, processing 4.8% less material. North America offered no comfort either—despite a reported 3.2% uptick, analysts attributed this to new data sources rather than genuine demand strength. When retailers track actual chocolate sales, the picture darkens further. North American chocolate candy sales dropped over 21% in the thirteen weeks through early September compared to the same period last year, according to Circana research.

Meanwhile, the supply side tells a different story. Ivory Coast farmers—the world’s largest cocoa producer—shipped 618,899 metric tons to ports between October 1 and November 23, down 3.7% from the prior year, but this modest retreat masks the broader abundance. Industry observers note that cocoa pod counts across West Africa are running 7% above the five-year average, with Ghana and Ivory Coast reporting weather conditions that favor rapid pod development and optimal bean drying.

The tariff landscape shifted suddenly when the Trump administration announced elimination of a 10% reciprocal tariff on non-US commodities including cocoa, while scrapping a proposed 40% duty on Brazilian food imports. Brazil ranks among the global top ten cocoa producers, making this move particularly significant for supply expectations.

March ICE NY cocoa closed Wednesday down 0.12%, while December ICE London cocoa slipped 0.27%, settling above recent lows but reflecting persistent downward pressure. The contradiction is stark: shrinking inventories at US ports—which fell to an 8.5-month low of 1.7 million bags—typically support prices, yet weak grinding demand continues to weigh.

One countervailing factor emerges from Nigeria, the world’s fifth-largest producer. The country’s cocoa association projects 2025/26 production will fall 11% year-over-year to 305,000 metric tons from a projected 344,000 in the current season. This production decline in a key supplier could provide price support if global demand stabilizes.

The broader context matters: the International Cocoa Organization’s latest assessments show 2024/25 yielding a global surplus of 142,000 metric tons—the first surplus in four years—following a historic 494,000 metric ton deficit the previous season. The organization estimates 2024/25 production climbed 7.8% to 4.84 million metric tons, a recovery that continues to overwhelm current demand destruction across major consuming regions.