Trump's Tariff Gamble Tanks Cocoa Prices—But the Real Story is Supply Chaos

Cocoa just got hit from both sides. ICE NY December futures are down 0.62% while London cocoa dropped 1.47% after the Trump admin announced it would slash reciprocal tariffs on non-US commodities by 10%—though Brazilian cocoa still faces a 40% national-security tariff. The math: cheaper supply expectations = margin compression for traders.

But here’s where it gets interesting. While tariffs push prices down, supply fundamentals are screaming the opposite story:

The West African Story

• Ivory Coast (world’s #1 producer) shipped 516,787 MT this season—down 5.7% YoY
• Mondelez data shows cocoa pod count is 7% above 5-year average, but here’s the catch: that’s just quantity. Quality concerns are emerging as the harvest just started
• ICE-monitored US port inventories hit a 7.75-month low of 1.77M bags—that’s bullish scarcity signal

Demand is the Real Problem

• Hershey’s Halloween sales were “disappointing” (Halloween = 18% of annual US candy sales)
• Q3 cocoa grindings collapsed across regions: Asia down 17% YoY (smallest Q3 in 9 years), Europe down 4.8% YoY (lowest Q3 in a decade)
• North American chocolate sales plunged 21% in 13 weeks through Sept 7

The Surplus That Nobody Wanted

• ICCO projects 2024/25 global surplus of 142,000 MT—first in 4 years—but production rose only 7.8% while demand flatlined
• Nigeria’s 2025/26 output projected to fall 11% YoY to 305,000 MT, partially offsetting the surplus glut

What’s Really Happening: Tariff cuts are giving traders an exit narrative, but chocolate makers aren’t buying because consumer demand is weak across all regions. The surplus is real, but it’s meeting a market that’s already oversupplied on demand side. Price action suggests tariff headlines matter more than fundamentals right now—classic risk-off commodity compression.

Watching: If ICE inventories stabilize or rise further, that confirms the demand weakness is structural, not tactical.