11.11.2025 - Daily Cocoa Market Report

Cocoa Futures Plunge as Heavy Fund Liquidation Meets Policy Shock

Cocoa futures experienced a sharp decline on Tuesday, driven by aggressive fund liquidation, large-scale rolling of December positions, and renewed policy uncertainty surrounding the European Union’s deforestation law. Both New York and London markets suffered their steepest one-day losses since late September, erasing the previous session’s modest recovery.

In New York, March 2026 cocoa settled at 5,929 dollars per tonne, down 272 dollars or 4.4%, while London’s March 2026 contract closed at 4,202 pounds per tonne, a decline of 238 pounds or 5.4%. The synchronized sell-off reflected not only speculative pressure but also commercial reactions to new trade policy developments in Europe, which could alter short-term certification and export incentives.

Certified Stocks

The large one-day rise in London certified stocks was a focal point for traders. Market participants attributed the increase partly to the European Union’s provisional decision to delay implementation of the anti-deforestation regulation (EUDR) by one year. The deferral prompted expectations that more non-certified beans could temporarily qualify for delivery, increasing near-term supply flexibility and pressuring prices.

Dealers described the move as “an opportunity to unload exchange-grade beans that were stuck outside the certification rules.” The timing of the announcement coincided with Tuesday’s surge in delivery nominations on the ICE Europe platform, amplifying the sell-side pressure in London cocoa.

Trading Volume and Open Interest

Volume figures underscore the scale of the sell-off. On Tuesday, total turnover reached 40,666 lots in New York and 36,802 lots in London, both far above recent averages. Spread volume also spiked, accounting for over 65% of total activity in London, reflecting mass liquidation and rebalancing between December and March positions.

The surge in volume amid falling prices signals forced long liquidation rather than new speculative shorting. Many traders were closing profitable positions accumulated during the summer rally, while commercial participants took advantage of the sharp drop to roll hedges forward at lower prices.

Open interest data show a similar pattern of contraction in December contracts and partial offset in March, suggesting that the bulk of the selling was position management rather than a fundamental change in trade sentiment. The heavy use of block and spread trades — 400 lots in New York and 210 lots in London — further indicates institutional restructuring of portfolios ahead of the November and December delivery cycles.

Technically, the drop pushed March New York cocoa below the lower Bollinger band, confirming a decisive break of the 6,000-dollar support zone. RSI readings on the 15-minute chart fell near 31, indicating short-term oversold conditions. However, the 200-period moving average continues to trend downward, maintaining a broader bearish bias.

Term Structure

The term structure flattened on both sides of the Atlantic. London’s nearby contracts weakened more sharply, narrowing the Mar–May spread and pointing to improved short-term supply availability. Despite the drop, New York’s curve retains slight backwardation, consistent with low certified stock levels and steady U.S. grind demand.

Policy and Market Impact: EU Deforestation Law Delay

Tuesday’s market shock was triggered largely by reports from Brussels that EU member states plan to postpone the anti-deforestation regulation (EUDR) by one year, from December 2025 to December 2026 for large companies and June 2027 for small ones.

The news, first reported by Reuters, came as a surprise to many cocoa participants who had priced in tighter import controls for 2026. Traders immediately interpreted the delay as a temporary easing of certification pressure, allowing traders and warehouses to reclassify previously excluded stocks. The result was an abrupt sell-off, particularly in London, where certification rules have a more direct impact on deliverable supply.

While some NGOs criticized the deferral as a setback for sustainability progress, industry representatives welcomed it as a necessary reprieve from what they described as “impractical traceability requirements.” For cocoa markets, however, the short-term effect was unambiguously bearish, as the prospect of additional deliverable stocks reduced nearby scarcity premiums.

Crop and Weather Developments

In West Africa, field reports indicate improving harvest activity. Ivory Coast exporters estimate arrivals at 411,000 tonnes by November 9, down 9.7% from last year but improving week by week. Harvesting conditions remain favorable, with isolated showers over central Ghana, southern Côte d’Ivoire, and parts of Cameroon.

Meteorological updates from Maxar show scattered rainfall persisting this week, ensuring adequate soil moisture for pod filling without major delays in drying. The Harmattan remains weak, and no significant north-to-south dry intrusions are expected before late November.

Farmers interviewed in Daloa and Soubré said that while pod counts remain high, the health of some trees has been affected by late-season black pod disease, particularly where humidity has remained above normal. Nonetheless, sentiment among growers is cautiously optimistic. Many expect the main crop to remain strong through January, with volumes approaching 500,000 tonnes by year-end if favorable weather continues.

Private analysts TRS and CRA issued mixed revisions: TRS now forecasts a 10,000-tonne reduction in the Ivorian crop outlook, citing disease pressure, but both TRS and CRA expect a modest global surplus for 2025/26, between 150,000 and 285,000 tonnes.

Industry and Consumer Developments

Industry news added another layer of complexity to Tuesday’s decline. With the EUDR delay in focus, several traders reported that European grinders and chocolate manufacturers temporarily paused forward purchases, preferring to wait for clearer legal guidelines before committing to new deliveries.

Chocolate producers continue to face high input costs but are showing adaptability. Companies such as Ritter Sport and Lindt remain committed to sustainability sourcing, even under a relaxed regulatory schedule. The broader retail environment remains stable: demand for premium chocolate is holding firm, while mass-market demand in Europe and North America is softening slightly due to price fatigue.

In the processing sector, Barry Callebaut and Olam have maintained forward sales volumes but are hedging less aggressively than earlier this year. Both firms continue to highlight strong demand from Asia, particularly India and Indonesia, as a counterbalance to slowing grind growth in Western Europe.

Market Interpretation

Tuesday’s session was characterized by a classic panic-unwind structure: heavy volume, high spread activity, and sharp price moves without a fundamental deterioration in crop conditions. The drop was triggered by regulatory news and compounded by technical breaches near key support levels.

Despite the severity of the move, most commercial participants describe it as an adjustment rather than a collapse. The steep decline in open interest during the session points to liquidation rather than new bearish positioning. Given the speed and magnitude of the fall, a short-term corrective rebound is plausible once technical indicators stabilize.

The underlying fundamentals—low U.S. stocks, moderate supply recovery, and weak Harmattan forecasts—still support a relatively tight medium-term balance. However, the market must now digest the psychological impact of the EUDR delay and its implications for certified stock dynamics.

Outlook

Short-term momentum remains bearish, but oversold conditions could trigger technical stabilization around the 5,850 to 5,900 dollar zone in New York and 4,180 to 4,220 pounds in London. Immediate resistance stands near 6,000 dollars and 4,300 pounds respectively.

The next few sessions will likely test whether the surge in certified stocks was a one-off adjustment or the start of a broader normalization trend. Weather remains favorable, and arrivals are improving, suggesting a more balanced fundamental outlook as the main crop progresses.

Medium-term direction will depend on the interplay between certified stock growth and speculative sentiment recovery. If open interest stabilizes and fund short-covering resumes, cocoa could regain footing later in the week.

Weekly Summary Box

Interpretation:
Tuesday’s crash was driven by regulation-induced panic rather than a structural demand collapse. The heavy volume and spread activity confirm a mechanical unwind, amplified by algorithmic trading and end-of-season position shifts. Despite the short-term damage, fundamentals remain moderately tight, setting the stage for a technical rebound once forced liquidation subsides.