The HC Commodities Podcast

Episode: “Coffee & Cocoa's Wild Ride”

Host: Paul Chapman (HC Group)
Guest: Kona Haque (Head of Research, EDF Man)
Release Date: January 7, 2026

Episode Overview

In this episode, Paul Chapman hosts Kona Haque to dissect the incredible volatility and record price surges seen in the coffee and cocoa markets throughout 2025. The conversation charts the fundamental supply and demand disruptions—rooted in climate volatility, structural challenges, and government intervention (notably tariffs)—that underpinned the wild ride in these markets. Sugar is touched on briefly, with its relative stability and the effects of changing demand trends.

Key Discussion Points & Insights

1. Global Coffee Market Fundamentals

• Production & Consumption:
  • Coffee is one of the world’s most traded commodities. Grown mainly in tropical regions (Brazil, Vietnam, Colombia, Central America, Africa, India), but consumed predominantly in Europe, the US, and Japan.
  • Quote:
    “Brazil is the world's largest producer by far. They produce mostly Arabica... Robusta is the more bitter tasting one... produced by Vietnam mostly... Then you have producers in Central America and Africa, with countries like Uganda, Tanzania, Kenya...” — Kona Haque [02:52]
• Supply Chain:
  • Major trade houses (Louis Dreyfus, Volcafe, ECOM, Neumann) source and ship green beans to global roasters (Nestle, Starbucks, supermarket brands).
  • Chains integrate finance, shipping, and storage, supporting both ends of the supply chain.
  • Coffee’s global infrastructure and hedging via exchanges in New York (Arabica) and London (Robusta) are vital to buffer market shocks.

2. The Coffee Price Explosion & Volatility (2024–2025)

• Five Consecutive Years of Deficit:

  • For the first time, coffee experienced five back-to-back years of supply deficits — “never happened in history” — due to extreme weather patterns (droughts, frosts) in both Brazil (drought, frost) and Vietnam (drought).
    • “24/25 season... was the fifth consecutive deficit… at some point you start wondering, what is going on? Is this a climate change effect?... Actually, that is exactly what happened.” — Kona Haque [10:10]
  • Both Arabica and Robusta production faltered, causing stocks to plummet, supply to evaporate, and prices to skyrocket.

• Demand Stickiness & Retail Impact:

  • Despite severe cost pressures, roasters were reluctant to pass higher costs to consumers, fearing loss of market share. This “stickiness” in demand meant little immediate demand destruction.
    • “One thing you’ll know about roasters is that it’s all about their market share. So even though prices are elevated, they’re loath to pass that down to the consumer.” — Kona Haque [13:11]
  • Consumers began “trading down”—opting for cheaper, lower-quality coffees or supermarket own-brands.
  • Supermarkets promoted coffee as a loss-leader, further muting price signals.

• Structural Constraints on Recovery:

  • Coffee responds slowly to price signals due to multi-year crop cycles and limited suitable land. Labor shortages, especially as younger workers leave for cities, exacerbate tightness.
    • “There’s only finite land... and one structural trend... is labor availability. Young people… their kids are moving to urban areas...” — Kona Haque [16:12]
  • Severe weather events (drought, unprecedented frosts) can destroy entire crops—recovery takes years, not months.

3. The Tariff Crisis: US Trade Policy as a Market Catalyst

• April 2025 “Liberation Day” Tariffs:

  • US imposed sudden, sweeping tariffs on coffee imports—10% on Brazil (then up to 50% as US-Brazil tensions escalated), 20% on other sources like Colombia.
    • “It was indiscriminate... Brazil... went up to 50%. That became a problem because Brazil is 50% of US import needs.” — Kona Haque [19:36]

• Market Fallout:

  • US roasters scrambled for alternative supply at a time of historic shortage, propelling both futures and cash prices higher.
  • Speculators exacerbated moves, pushing prices well beyond $4/lb and above $400/bag.
  • Political wrangling (Trump-Lula tensions, Vietnam exception) created further unpredictability; after consumer backlash, some tariffs were eventually rolled back but supply remained tight due to prior crop loss.
    • “At some point they had to come down because no one was hurting more than US consumers and US roasters.” — Kona Haque [21:45]

• Pass-Through Effects:

  • Despite roasters absorbing much of the early tariff impact, some cost increases did reach consumers—especially for out-of-home branded coffee.

4. Lasting Market Impacts & Resilience

• Producers generally benefited from the sharp price surges, encouraging new planting where possible, but replanting after crop loss (from frost/drought) takes years.
  • Quote:
    “In terms of the growers, I think they benefited from the immediate escalation in prices... price response has been very favorable to farmers.” — Kona Haque [27:14]
• Roasters fared worse: with supply physically unavailable, companies like Starbucks, Folgers, and Smuckers suffered margin hits.
• Market structurally vulnerable to repeated external shocks (climate, tariffs, geopolitics), with each cycle risking deeper fractures.

5. Cocoa’s Parallel Wild Ride

Cocoa Market Overview

• Production: Dominated by West Africa (Ivory Coast, Ghana, Cameroon, Nigeria), with Ecuador and some Asian origins growing in importance.
• Supply Chains & Processing: Mix of smallholder farmers and trade houses, with value-add (grinding, butter, liquor) sometimes done at origin, sometimes at destination.

2025 Cocoa Crisis

• Chronic Underinvestment and Structural Issues:

  • Marketing boards in West Africa shelter farmers from downside, but during bull runs they miss out on windfall profits due to preset prices—dampening incentive for crop care or expansion.
    • “When prices spike... farmers lose out. And that’s exactly what had been happening.” — Kona Haque [35:41]

• Weather and Disease Compounded Problem:

  • Old, neglected trees fell victim to disease (notably swollen shoot disease), undermining supply just as global demand rose.

• Historic Price Explosion:

  • Cocoa soared from $2,000/ton to $12,000/ton in less than two years—a 600% increase.
    • “The supply shortage... a long time coming... proper structural expansion required here... has to happen in these countries.” — Kona Haque [36:00]
  • Farmers in Africa only captured a small fraction of these record prices; grinding and processing companies (Barry Callebaut, Olam, Cargill, etc.) and end brands scrambled for supply.
  • Ecuador and some African countries responded with higher-yielding hybrids, but overall global volumes remain constrained.

Speculator and Index Impact

• Extreme price moves drew hedge fund and index attention (notably the Bloomberg Commodity Index inclusion); cocoa became “the classic long thesis” for commodity players in 2025.
  • “You even had some commodity funds... look at oil... went all into cocoa. He loved the story.” — Kona Haque [41:00]

Demand Destruction and Product Innovation

• Chocolate companies cut costs via “shrinkflation” and reformulation, using less cocoa, adding nuts, biscuits, holes—driving recorded grindings (proxy for demand) sharply lower in Europe and Asia.
  • “The word shrinkflation… came out of chocolate where your typical bar became smaller for the same price...” — Kona Haque [43:59]
• While prices fell from peak, demand only stabilized recently, and new supply remains uncertain due to persistent weather risk and need for better varietals.

6. Sugar: The “Boring” Soft This Year

• After several years of modest deficits, sugar prices rose but markets quickly adjusted. Brazil switched to sugar over ethanol due to better prices; India and Thailand are rebuilding supply.
  • “Sugar, like coffee... had its own multi-year deficits... which led to sugar prices going to 20 cents per pound... those millers [in Brazil]... switched to sugar production.” — Kona Haque [47:36]
• Demand is largely inelastic, propped up by government tenders (e.g. China), but long-term threats loom:
  • Health trends and drugs like Ozempic could structurally reduce demand in Europe and the US.
  • Increased Brazilian corn-based ethanol is creating new supply-side competition.
• Price Trend:
  • Sugar prices have softened as stocks rebuild and supply surges; a bearish medium-term outlook prevails.

Memorable Quotes & Moments

• On coffee’s demand inelasticity:
  “Let’s all face it, you know, coffee is— is addictive.” — Kona Haque [14:41]
  Paul: “I have a Starbucks in front of me right now... shows how sticky and inelastic the demand is in our household.” [14:45]

• On market structure and resilience:
  “Whatever doesn’t kill you might just, you know, end up making you weaker and more beaten up... another round of tariffs or disruption could really fracture these markets.” — Paul Chapman [29:03]

• On cocoa’s price surge and disconnect:
  “You’ve got these $12,000/ton prices— the farmer really only saw a fraction, a decimal of that...” — Kona Haque [35:41]

• On the buyer’s dilemma:
  “Roasters care about market share more so than possibly their own margins.” — Kona Haque [24:21]

• Summary judgement:
  “Back coffee, buy cocoa, sell sugar.” — Paul Chapman [54:54]

Timestamps for Key Segments

• [02:52] – Global coffee production & supply chain explained.
• [10:10] – Why the 2025 coffee deficit was unprecedented.
• [13:11] – Inelasticity of coffee demand and the retailer’s role.
• [16:12] – Structural production limits & labor shortages.
• [19:36] – The story of US coffee tariffs and political fallout.
• [27:14] – Who got hurt, who benefited from high coffee prices.
• [30:18] – Cocoa: supply chain and smallholder challenges.
• [35:41] – Role of government marketing boards and disease in cocoa’s shortage.
• [41:00] – Index and hedge fund inflows into cocoa.
• [43:59] – “Shrinkflation” in chocolates amid high cocoa prices.
• [47:36] – Quick survey of sugar’s “boring” surplus and changing demand.
• [52:45] – Weight loss drugs like Ozempic’s impact on sugar demand.

Closing Thoughts & Tone

The episode balances deep technical insight with conversational, often dry-humored commentary on the genuine human and economic stakes in the world’s most beloved soft commodities. “There’s nothing ever easy in the tropical commodities market. There’s always something around the corner.” — Kona Haque [54:30] sums up the mood: caution and fascination for markets buffeted by weather, politics, and shifting global appetites.

For more information:

• Visit HC Group
• Connect with Paul Chapman via LinkedIn

Summary by HC Group Podcast AI
(January 2026 — All rights reserved)