West African Weather Boosts Adequate Cocoa Supplies, Pressuring Futures Lower

Cocoa futures retreated on Thursday as favorable climatic conditions across major producing regions signal sufficient commodity availability ahead of the 2025/26 season. New York ICE cocoa for March delivery fell 44 points (-0.74%), while London cocoa dropped 24 points (-0.55%), marking the New York contract’s lowest level in one week.

Supply Outlook Strengthens Amid Optimal Growing Conditions

The recent pullback reflects improved production prospects in key cocoa-growing areas. Farmers in the Ivory Coast have reported that balanced precipitation and sunlight are supporting pod formation, while Ghanaian cultivators noted consistent rainfall is fostering healthy development before the harmattan winds arrive. Chocolate manufacturer Mondelez disclosed that pod counts across West Africa currently sit 7% above the five-year benchmark and substantially exceed prior-year levels, indicating the potential for adequate global supplies in coming months.

This supply trajectory marks a significant shift from earlier deficit concerns. The International Cocoa Organization previously estimated a 2024/25 deficit of 494,000 MT—the most severe in six decades—but revised expectations after production climbed 7.4% year-over-year to 4.69 MMT. Citigroup subsequently lowered its 2025/26 surplus projection to 79,000 MT from 134,000 MT, while Rabobank cut forecasts to 250,000 MT from 328,000 MT.

Inventory Dynamics and Market Support

Despite bearish supply signals, ICE-monitored warehouse inventories at U.S. ports fell to a nine-month trough of 1,642,801 bags, providing technical support. This scarcity of immediate supply has cushioned some price declines, though forward availability concerns remain limited.

A potential bullish catalyst emerged with Bloomberg’s decision to include New York cocoa futures in its Commodity Index starting January. Analysts project this inclusion could trigger approximately $2 billion in passive fund buying during the first week of the new year.

Demand Challenges Offset Supply Gains

Global chocolate consumption growth has stalled considerably. The Cocoa Association of Asia reported Q3 grinding volumes fell 17% year-over-year to 183,413 MT—the weakest performance in nine years. Europe’s third-quarter grindings similarly declined 4.8% to 337,353 MT, marking a ten-year low. North American chocolate sales volumes contracted more than 21% in the thirteen-week period through September versus year-ago comparisons, despite reported third-quarter grindings rising 3.2% to 112,784 MT.

Hershey’s executive team characterized Halloween candy sales as “disappointing,” a significant concern given the holiday typically accounts for 18% of annual U.S. confectionery spending.

Regional Production Constraints Emerge

While West African supplies appear adequate, Nigeria’s production trajectory diverges sharply. The world’s fifth-largest producer projects a 11% year-over-year decline to 305,000 MT for 2025/26, down from an estimated 344,000 MT. September cocoa exports from Nigeria remained flat year-over-year at 14,511 MT.

The Ivory Coast, representing the globe’s largest production region, has initiated its primary harvest. Government data through mid-December showed 895,544 MT shipped to ports, up marginally 0.2% from the prior-year period, suggesting orderly execution despite elevated pod counts.

Policy and Price Implications

The European Parliament’s November approval of a one-year delay to deforestation regulations (EUDR) further pressured prices by ensuring continued supply access from regions experiencing forest cover loss. This reprieve permits EU countries to maintain imports from African, Indonesian, and South American sources where deforestation persists.

The confluence of adequate supply expectations, weak demand indicators, and delayed regulatory enforcement has created headwinds for near-term price appreciation, despite underlying structural improvements in inventory availability.