Cocoa markets have continued to react to uncertainty over EUDR legislation, with commodities prices on Futures trading platforms now commanding a three-month high, at around $8,500 a tonne, writes Neill Barston.

This past week saw a crucial vote on the new deforestation legislation covering the sector and related ingredients including palm oil and soy, take a further complex twist, as last minute amendments from the European People’s Party effectively creating county exemptions were forced through.

As numerous observers have noted, the development has cast doubt on the delivery of the landmark legislation, with the EPP demanding the insertion of ‘no risk’ nations – which environmental campaigners have highlighted is nearly impossible to achieve and further weakens the intended impact of the legislation.

Off the back of this, cocoa values rose steeply by 20% in the past couple of weeks, with a number of other influencing factors including funds participations, reduced crop forecast due to post-heavy rains, worrying cocoa beans quality, and critically low warehouse stock.

As an industry source noted to Confectionery Production, with six weeks down to end 2024, EUDR is having a huge uncertainty again, with the agreement which was originally signed more than 18 months ago, needing to be finalised before 31 Dec 2024, if not it will be implemented to its original timescale that was scheduled to begin at the end of next month – until lobbying from nations within the bloc led to the vote to push back its start-date until December 2025.

According to the sector source, the outlook remains bullish with a tight supply and resilient demand, any adverse events, such as disease outbreaks, could drive the market into further deficit.

With critically low stocks in Europe and the U.S. the industry need replenishment from the ongoing main crop (Oct-Mar) to avoid potential shortages. While Q3 grinding statistics show solid demand, with industry coverage at only five months, there is increasing pressure on the sector to secure additional cocoa.

Consequently, in the short-term as well as longer-range forecasts, the cocoa market remains bullish due to EUDR uncertainty, funds participations, reduced crop forecast and low warehouse stocks, despite being replenished by the main crop.