Trump's Tariff U-Turn Triggers Cocoa Selloff—But Supply Crunch May Have the Last Laugh

Cocoa futures took a hit on Monday as traders digested the Trump administration’s decision to scrap the 10% reciprocal tariff on non-US commodities, including cocoa. December NY cocoa dropped 0.44% while London cocoa slid 1.47%. The move sounds bullish for importers, but there’s a catch: Brazilian cocoa—the world’s fifth-largest producer—still faces a 40% national-security tariff, keeping import costs elevated.

Here’s where it gets interesting. Despite the tariff relief, structural forces are quietly supporting prices:

Supply tightening from West Africa is real. Ivory Coast (the global #1 producer) shipped 516,787 MT of cocoa in the Oct-Nov marketing window, down 5.7% year-over-year. Nigeria—the fifth-largest producer—is projected to see production fall 11% in 2025/26. And with ICE cocoa inventories at a 7.75-month low, the physical market has little buffer.

Demand is weak, but normalize that. Chocolate sales bombed this Halloween (Hershey’s CEO admitted it was “disappointing”). Q3 cocoa grindings across Asia fell 17% YoY—the smallest quarterly grind in 9 years—while Europe saw a 4.8% decline. Confectioners are pulling back hard.

The supply-demand math is flipping. ICCO data shows 2024/25 is expected to post a 142,000 MT surplus—the first in four years—after last year’s catastrophic 494,000 MT deficit. That’s a massive swing, but production is still recovering from structural damage, and stocks remain historically lean at a 46-year low stocks-to-grindings ratio.

Bottom line: Tariff cuts are punching prices lower short-term, but the combination of subdued demand + lingering supply tightness suggests cocoa might find a floor sooner than bulls expect. Watch Ivory Coast harvest sentiment and Q4 grind data.