Cocoa Market: Declining Demand and Trade Uncertainty

Cocoa prices for the September 2025 contract closed on Friday, July 18, at USD 7,800 in New York and GBP 5,048 in London, accumulating 11.8% and 3.6% weekly losses, respectively. Despite this weekly decline, the RSI (Relative Strength Index) signaled a technical recovery last Friday, rising to 36.8 after breaking out of the oversold zone on Thursday, when it fell below 30 points. The movement also reflected the price recovery observed at the end of the week, indicating some relief in selling pressure. However, the indicator has been trending downward since mid-May, signaling that the market remains in a zone of attention.

This scenario was caused by the release of grinding results for the second quarter of 2025, an important indicator of cocoa demand. Reports released by the ECA, CAA, and NCA, associations of beans processors for Europe, Asia, and North America, showed reductions of 7.2%, 16.3%, and 2.8%, respectively, compared to the same period last year. The decline may be related to supply shortages and record cocoa prices, which are impacting the operations of global processors.

The possibility of a drop in demand had already been addressed in previous analyses. For example, data show that total net cocoa imports (beans, paste, and powder) from the European Union accumulated since the beginning of 2025 are 7.2% below the same period for the previous year, which already indicates the possibility of a new reduction in grinding.

On the other hand, a different scenario can be observed for the US, which increased its total net cocoa imports, especially beans from countries such as Ecuador. Between January and the present, volumes are approximately 46% higher than in the same period in 2024. This is a possible reason why North American grinding reduction was less intense than in the other regions observed, which may have supported the recovery of cocoa prices. Unlike the others, the NCA data was published after the market closed, with its impact felt on Friday, July 18, which may help explain the movements mentioned, including technical indicators.

However, it is worth noting that total net cocoa imports from the US fell back below average levels in April, possibly reflecting the impact of high commodity prices on demand. Even after the corrections observed since early 2025, cocoa prices remain at historically high levels. Financial reports from major processors in the sector show a decline in sales volume, which supports this scenario.

In this sense, another highlight that may have an effect on US cocoa demand is US tariffs. In recent weeks, a new chapter on the subject began after the announcement of a round of tariffs on countries such as Malaysia, Indonesia, Canada, and Brazil, important players in the cocoa market.

The US is one of the world's largest consumers of cocoa and exporters of chocolate and confectionery products, and, as such, imports cocoa beans and cocoa products. In 2024, butter, powder, and paste accounted for 17%, 19%, and 25% of the country's total cocoa imports, respectively, coming from countries such as Brazil, Malaysia, and Indonesia, all taxed according to the new tariffs, which are set to take effect on August 1. Some countries are in negotiations to reach agreements, such as Indonesia, which has reduced tariffs from 25% to 19% and is seeking exemption from taxes on some of its exported products, such as cocoa and its derivatives. However, even if renegotiated, tariffs could still have an impact on the global economy and cocoa trade flows.

In general, the market is concerned about the possibility of increased inflation in the United States as a result of the imposition of tariffs on trading partners, which could put pressure on domestic prices and reduce the scope for future interest rate cuts in the country. This new announcement had a direct impact on the commodities market and adds another element to the already persistent volatility observed in the cocoa market.

Despite the downward pressure from demand, it is worth noting that the supply scenario remains tight for the cocoa market and that any new information on the progress of the season in major producing countries, such as Ivory Coast and Ghana, could change price behavior. In addition, investments in new plantations driven by high cocoa prices in recent years are only expected to have an effect in the medium to long term, considering the time it takes for the crop to develop. In the week ending July 18, speculators reduced their net long positions on both ICE US and ICE Europe, reflecting greater caution in light of recent price volatility.

Cocoa prices for the September/25 contract ended the week of 18 July down, with New York and London accumulating losses of 11.8% and 3.6%, respectively. The pressure came largely from the decline in second quarter grinding results released by the main global associations: ECA (-7.2%), CAA (-16.3%), and NCA (-2.8%). Even so, the RSI (Relative Strength Index) signaled a technical recovery on Friday after breaking out of the oversold zone, reflecting relief in prices at the end of the week.

This movement comes amid mixed signals in global demand. While net imports from the EU remain 7.2% below the previous year, anticipating a decline in European grinding, the US recorded a 46% increase in the year to date, which may have limited the decline in US processing.

In addition to supply and demand dynamics, the market was also impacted by new tariffs announced by the US on products from countries such as Brazil, Indonesia, and Malaysia, which are major suppliers of cocoa derivatives. The measure increases the perception of domestic inflationary risk and may affect both demand for commodities and the scope for future US interest rate cuts, adding uncertainty to the macro scenario.

The market continues to closely monitor supply fundamentals, especially the progress of the 24/25 harvest in West Africa, which remains a key factor in price formation.