Cocoa Prices Slide to 2-Year Lows as Ample Supplies Overwhelm Chocolate Demand

Cocoa futures tumbled sharply in recent weeks, with March ICE New York contracts plunging 6.00% and March ICE London cocoa contracts falling 6.41%. The retreat marks the deepest decline in nearly two years, as both New York and London futures hit their lowest levels since early 2024. At the heart of this selloff lies a critical imbalance: unprecedented ample supplies are colliding with collapsing consumer demand for chocolate.

Consumer Resistance and Plummeting Sales Volumes

The chocolate industry is facing an unexpected crisis of its own making. Consumers worldwide have grown increasingly price-sensitive, with retailers and manufacturers reporting significant resistance to elevated chocolate prices. Barry Callebaut AG, the world’s largest bulk chocolate manufacturer, provided the most visible evidence when it disclosed a stunning 22% decline in cocoa division sales volume for the quarter ending November 30. The company attributed this collapse to “negative market demand and a strategic shift toward higher-margin segments,” signaling that even major industry players cannot sustain sales at current price levels.

This demand destruction ripples through the entire cocoa processing chain. European cocoa grindings—a key barometer of chocolate production demand—fell 8.3% year-over-year to 304,470 metric tons in the latest quarter, well below industry expectations of a 2.9% decline. More troublingly, this marks the weakest Q4 performance in 12 years. Asian cocoa grindings similarly declined 4.8% year-over-year to 197,022 metric tons, while North American grindings posted only a marginal 0.3% year-over-year increase to 103,117 metric tons—essentially flat growth.

The Ample Supply Paradox: From Deficit to Surplus

The supply picture has reversed dramatically from just one year ago. In May 2024, the International Cocoa Organization reported a deficit of 494,000 metric tons—the largest in over 60 years. That supply tightness had supported higher prices throughout 2024. However, the organization now forecasts a 49,000 metric ton surplus for the 2024/25 crop year, marking the first surplus in four years.

This reversal stems from improving West African harvests. Favorable growing conditions in Ivory Coast and Ghana have yielded larger and healthier cocoa pods compared with the previous year. Mondelez, a major chocolate maker, reported that cocoa pod counts in West Africa stand 7% above the five-year average and materially higher than last year’s crop. With the Ivory Coast’s main harvest now underway and farmers reporting optimistic crop quality, ample supplies are likely to persist through the current marketing year.

Inventory Levels and Storage Dynamics

Despite the arrival of fresh supplies, a counterintuitive pattern has emerged in physical cocoa inventories held at monitored US ports. After dropping to a 10-month low of 1,626,105 bags on December 26, stockpiles have rebounded to 1,752,451 bags—a two-month peak. This inventory accumulation, combined with ample supplies arriving from major producing regions, suggests that storage facilities are filling faster than chocolate makers can absorb cocoa, a bearish signal for prices.

Production Forecasts Point to Persistent Supply Pressure

Looking ahead, cocoa production is expected to rise. The International Cocoa Organization raised its 2024/25 global production estimate to 4.69 million metric tons from 4.84 million metric tons previously, an increase of 7.4% year-over-year. However, this supply expansion faces one significant constraint: Nigeria, the world’s fifth-largest cocoa producer, is struggling.

Nigeria’s November cocoa exports fell 7% year-over-year to just 35,203 metric tons. More concerning, Nigeria’s Cocoa Association projects that 2025/26 production will decline 11% year-over-year to 305,000 metric tons from an estimated 344,000 metric tons in the current year. This production weakness in Nigeria, however, is insufficient to offset the ample supply increases from Ivory Coast and Ghana, which together account for over 60% of global cocoa production.

Ivory Coast, the world’s largest cocoa producer, shipped 1.16 million metric tons of cocoa to ports during the new marketing year (October through mid-January), down 3.3% from 1.20 million metric tons in the same period last year. While this shipment decline offers modest price support, it pales in comparison to the ample global supply situation and weak processing demand.

The Deforestation Regulation Twist

A regulatory development briefly pressured prices further. The European Parliament approved a one-year delay to the deforestation regulation (EUDR) on November 26, which temporarily maintains ample cocoa supplies by allowing EU countries to continue importing agricultural products from regions experiencing deforestation, including parts of Africa, Indonesia, and South America. This delay removes a potential supply constraint that might have supported prices.

The Outlook: Ample Supplies vs. Limited Demand Recovery

The fundamental mismatch remains clear: ample cocoa supplies are arriving into a market where chocolate demand remains subdued and consumers balk at premium pricing. Rabobank recently cut its 2025/26 global cocoa surplus forecast to 250,000 metric tons from 328,000 metric tons, suggesting that while supply pressures may moderate slightly, surpluses will persist. Until chocolate manufacturers and retailers find ways to reduce input costs or until consumers regain appetite for premium chocolate at current prices, cocoa prices are likely to remain pressured by the persistent supply-demand imbalance.