Cocoa prices have entered a sharp correction phase after months of slow declines. The recent acceleration stems from a mix of regulatory shifts, technical signals, and trader positioning.
One key factor: the European Union’s decision to delay its Deforestation Regulation (EUDR), removing immediate pressure from supply chains and reshaping market sentiment.

For procurement teams and chocolate manufacturers, these developments mark the most favorable coverage conditions seen in years.

EUDR delay eases supply chain pressure

The European Commission confirmed plans to postpone the EU Deforestation Regulation for at least another year. Environment Commissioner Jessika Roswall cited technical concerns and potential disruption to global supply chains as main reasons for the proposed delay.

The regulation requires importers to identify the exact plots where commodities such as cocoa were grown — a major logistical hurdle. The postponement removes a significant source of tension from the market, reducing fears about the availability of compliant beans and easing perceived tightness in European pipelines.

Flattening market structure signals reduced tightness

Cocoa futures have seen a pronounced flattening in recent weeks.

  • The March 25/March 26 time spread fell to GBP 10 in London and USD 123 in New York — barely inverted levels.
  • London cocoa futures dropped 13.9% and New York 14% over the past two weeks.

A flatter futures curve typically reflects reduced physical tightness and weaker urgency among buyers to secure near-term deliveries. The EUDR delay contributed to this shift by lowering perceived logistical risks, while broader expectations of supply surpluses added further downward pressure.

Hedge funds turn short as technical signals dominate

The flattened market structure coincided with a notable shift among systematic hedge funds, collectively known as Managed Money.
For the first time since Vesper began publishing cocoa reports, Managed Money has moved to a net short position.

  • The combined net position across London and New York dropped to 0.3 k lots long, with London at –5.7 k lots.
  • Open Interest rose to 158 k lots in London and 118 k lots in New York, signaling increased market activity.

These systematic traders base decisions on momentum and market structure rather than fundamental supply-demand balances. Their entry on the short side underscores the bearish technical environment — though, as history shows, such shorts can be temporary once liquidity tightens again.

Production outlook: South America strengthens, demand weakens

Fundamental expectations have turned bearish as well. The market anticipates back-to-back global surpluses, with production forecast to exceed consumption by roughly 186 k metric tons in 2025/26.

Growth is led by South America, where:

  • Ecuador is projected to increase output by 5% to 580 k metric tons this season.
  • Additional gains across Peru, Colombia, and Venezuela could add up to 100 k metric tons more.

Meanwhile, consumer demand remains subdued as high retail prices curb chocolate purchases and manufacturers continue reformulating products to use less cocoa.

Historic farmgate prices in West Africa

Despite the softer global outlook, West African governments raised farmgate prices to record levels:

  • Ivory Coast: 2,800 CFA francs/kg (+55% year-on-year)
  • Ghana: 3,625 cedis per 64 kg bag (+17% year-on-year)

For Ivory Coast farmers, this marks a nearly fourfold increase since 2012. Political timing ahead of national elections may have influenced the hike, but it nonetheless provides meaningful short-term income relief for producers.

This article is part of a more comprehensive market analysis on the cocoa market. For the full market analysis, go to: https://app.vespertool.com/market-analysis/2332