Cocoa slumps 5% 📉Processing drops 22% in Malaysia

Cocoa (COCOA) futures on ICE are down over 5% today, despite the absence of any direct news that would clearly justify such a sharp market reaction. The move reflects growing uncertainty surrounding both supply and demand dynamics in the cocoa market. 

• Prices are weighed down by a sharp drop in cocoa bean processing volumes in Malaysia — a signal that demand pressures are intensifying in the global chocolate supply chain. Malaysia, Asia’s second-largest cocoa processing hub, reported a 22% year-over-year decline in Q2 cocoa grindings. This steep drop is widely viewed as a red flag for the health of demand, especially in a market already strained by historically high cocoa prices.
• Chocolate makers are being squeezed from both sides — rising input costs on one end, and demand softness on the other. The lower Malaysian grind suggests that end users are pulling back, likely rationing usage or holding off on purchases due to cost concerns. 
• The decline in Malaysia now has market participants turning their attention to upcoming cumulative grind data from Asia, Europe, and North America, scheduled for release Thursday. These figures will provide a more complete picture of global demand health — and may confirm whether this is an isolated signal or a broader trend.
• For chocolate manufacturers, the current market dynamics are prompting serious questions about strategy. With high cocoa prices likely to persist and consumption patterns shifting, many are being forced to rethink formulations, sourcing models, or product lines to remain competitive and sustainable.

The decline in Malaysian processing is more than just a regional development — it mirrors a deeper fragility in the cocoa value chain. As demand shows signs of faltering and price volatility remains high, the market is entering a delicate phase where adaptability and forward-looking decisions will be essential for all players.

Cocoa market news

• Ghana continues to struggle with crop diseases and adverse weather, yet the headlines are not lifting prices. The country’s cocoa regulator (COCOBOD) has warned that prolonged rainfall and a lack of sufficient sunlight have led to increased fungal infections affecting cocoa trees. However, early assessments suggest that the current season may only see a moderate decline in output.
• Farmers are calling for government support. Ghana’s national farmers' association notes that cooler temperatures and excessive moisture are creating ideal conditions for diseases like black pod, which threatens yields and could translate into serious income losses and long-term structural issues in the sector.
• The president of the cocoa farmers' union reported widespread fungal outbreaks in 72 cocoa-growing districts. In response, COCOBOD has stepped up preventative measures, including large-scale spraying and fungicide distribution, aiming to complete these efforts ahead of the peak harvest period.
• Ghana may miss its production target for the 2024/2025 season. According to COCOBOD data from May, there is a risk the country won’t reach its goal of 650,000 metric tons, continuing the downward production trend seen across parts of Africa.
• In contrast, Côte d’Ivoire is ahead of schedule in forward contract sales. The Coffee-Cocoa Council (CCC) announced that 850,000 metric tons have already been contracted for export for the 2025/2026 season — a significant portion of the reduced 1.3 million ton cap. That target was initially expected to be met by August.

The CCC implemented the new forward sales cap in June, cutting it from 1.7 million tons to 1.3 million, to limit delivery risk in the event of weather-related disruptions. However, unlike Ghana, Ivory Coast appears to be enjoying more favorable weather conditions, helping stabilize its outlook. Global cocoa prices remain elevated despite recent pullbacks. Although down from the record highs of 2024, prices are still roughly 150% higher than a year ago, raising concerns about the resilience of demand at such levels.

COCOA (D1 interval)

Source: xStation5