Global Cocoa Supply Squeeze Drives Price Surge to Monthly Peaks

Cocoa futures are experiencing a sharp uptrend, with March ICE NY cocoa climbing +348 points (+5.92%) and March ICE London cocoa advancing +247 points (+5.81%), both hitting their highest levels in a month. The robust price performance stems from mounting concerns about tightening supplies across major producing regions.

Supply-Side Pressures Intensify Cocoa Price Momentum

The International Cocoa Organization significantly downgraded its outlook for 2024/25 global cocoa balance. On November 28, ICCO slashed its surplus projection to just 49,000 MT—a dramatic 66% reduction from the prior 142,000 MT forecast—while simultaneously cutting production estimates to 4.69 MMT from 4.84 MMT. This marks the first surplus in four years, but at substantially lower levels than previously expected.

Rabobank’s latest assessment reinforces the tightening narrative. The bank reduced its 2025/26 global surplus estimate to 250,000 MT from 328,000 MT, indicating persistent inventory strain extending into the next marketing year.

The physical market reflects these supply constraints. ICE-monitored cocoa inventories at US ports fell to an 8.75-month trough of 1,672,131 bags on Tuesday, signaling diminished availability for near-term delivery. Meanwhile, arrivals at Ivory Coast ports—the world’s top cocoa producer—painted a concerning picture: farmers shipped 804,288 MT through December 7, representing a 1.8% year-over-year decline from 819,425 MT during the same 2023 period.

Structural Support From Index Inclusion and Nigeria’s Production Decline

Beginning in January, cocoa futures will join the Bloomberg Commodity Index (BCOM), creating a structural tailwind for prices. Citigroup estimates this inclusion could trigger as much as $2 billion in passive fund inflows during the index’s opening week, providing upside momentum.

Nigeria, ranking fifth globally in cocoa production, faces headwinds of its own. The country’s Cocoa Association projects 2025/26 output will contract 11% year-over-year to 305,000 MT from an anticipated 344,000 MT in the current crop year. Nigeria’s September cocoa exports held flat at 14,511 MT on a year-over-year basis, suggesting production challenges are translating into export pressures.

Offsetting Headwinds: Demand Weakness and Favorable Weather Temper Rally

Despite supply tightness, several factors are capping cocoa price appreciation. Chocolate demand remains sluggish across major consuming regions. Hershey’s CEO described Halloween chocolate sales as “disappointing,” while industry data underscores the weakness: Q3 Asian cocoa grindings plummeted 17% year-over-year to 183,413 MT—the lowest third-quarter reading in nine years. European cocoa grindings fell 4.8% year-over-year to 337,353 MT, marking a ten-year low for the quarter.

Weather conditions in West Africa are improving, which threatens to boost yields and abundance. Farmers in Ivory Coast report favorable moisture patterns supporting cocoa tree blooming, while Ghanaian producers note consistent rainfall aiding pod development. Chocolate manufacturer Mondelez observed that current pod counts in West Africa run 7% above the five-year average and materially exceed last year’s harvest.

Recent policy developments have also weighed on cocoa prices. The European Parliament’s November 26 approval of a one-year delay to the deforestation regulation (EUDR) will continue allowing imports from deforestation-prone regions, potentially supporting future supply availability. Additionally, the Trump administration’s November 14 announcement to drop reciprocal tariffs on non-US commodities, including cocoa, and reduce Brazil tariffs from 40%, has reduced some supply-side concerns for major producing countries.

Market Perspective

The cocoa price surge reflects a complex interplay of structural undersupply meeting passive index-driven demand, even as consumption metrics disappoint and weather improvements promise future abundance. The first surplus in four years arrives at manageable levels, sustaining price support despite the challenging demand environment.