Global Cocoa Surplus Outlook Pressures Prices Amid Adequate Supply Expectations

West African cocoa production is poised for recovery, creating headwinds for cocoa futures markets. Both ICE NY cocoa and ICE London cocoa contracts declined Thursday, with NY cocoa sliding to fresh weekly lows as market participants factored in improved yield prospects across the region.

Supply Recovery Fuels Market Pressure

Favorable weather patterns across West Africa are catalyzing higher pod counts and better tree development. In the Ivory Coast, farmers report that intermittent rainfall combined with sunshine has accelerated cocoa tree blooming cycles. Similarly, Ghana’s recent rain patterns have supported pod maturation ahead of the harmattan winds. Mondelez, a major chocolate manufacturer, disclosed that current pod counts in West Africa are running 7% above their five-year average and “substantially higher” compared to the previous crop cycle. These conditions are setting the stage for an abundant harvest as the Ivory Coast’s primary season just commenced.

Ivory Coast port arrivals underscore the supply momentum. Government figures released Monday indicated that farmers shipped 895,544 MT of cocoa during the October 1-December 14 marketing period, representing a marginal +0.2% increase from 894,009 MT in the prior-year window. As the world’s top cocoa producer, the Ivory Coast’s shipment trajectory carries outsized influence on global pricing dynamics.

Inventory Dynamics Present Mixed Signals

One offsetting factor emerged from inventory data: ICE-monitored cocoa stocks held at US ports hit a 9-month low of 1,642,801 bags on Thursday, which theoretically supports prices. However, this inventory tightness has been overwhelmed by supply outlook revisions from major forecasters.

Citigroup sharply reduced its 2025/26 global cocoa surplus projection to just 79,000 MT from September’s 134,000 MT estimate, signaling a tighter-than-expected market. Rabobank similarly cut its 2025/26 surplus forecast to 250,000 MT from a November estimate of 328,000 MT. Earlier, the International Cocoa Organization (ICCO) slashed its 2024/25 surplus to 49,000 MT on November 28, down from a prior 142,000 MT projection, while also reducing its production estimate to 4.69 MMT from 4.84 MMT.

Demand Contraction Complicates Price Support

Chocolate consumption patterns across major consuming regions have deteriorated markedly. Hershey’s leadership acknowledged disappointing chocolate sales during the 2024 Halloween season, a period that typically drives nearly 18% of annual US candy sales. Asia’s cocoa grinding activity fell 17% year-over-year in Q3 to 183,413 MT, marking the weakest third-quarter performance in nine years. Europe’s cocoa grindings contracted 4.8% year-over-year to 337,353 MT in Q3, the lowest reading for the period in a decade. North American chocolate candy sales volume tumbled over 21% during the 13-week period ending September 7.

Production Challenges in Secondary Producers

Nigeria, the world’s fifth-largest cocoa producer, faces structural headwinds. The Nigerian Cocoa Association projects a -11% year-over-year decline in 2025/26 production to 305,000 MT, down from the projected 344,000 MT for 2024/25. September cocoa exports remained flat at 14,511 MT year-over-year, reflecting ongoing production constraints.

Market-Moving Developments

The EU Parliament’s November 26 approval of a one-year delay to the deforestation regulation (EUDR) has extended the timeline for stricter import controls on cocoa and other commodities from high-deforestation regions across Africa, Indonesia, and South America. This extension preserves supply channels that would have otherwise faced restrictions, keeping global cocoa availability adequate for near-term market needs.

Separately, cocoa futures secured fresh catalysts from index-inclusion dynamics. NY cocoa’s addition to the Bloomberg Commodity Index (BCOM) beginning January is expected to attract approximately $2 billion in passive fund inflows during the first week of the month, according to Citigroup estimates. This technical factor may provide temporary price support independent of fundamental supply-demand dynamics.

Historical Context

The cocoa market’s recent pressures stand in stark contrast to the prior-year environment. ICCO’s May 2024 report revealed a 2023/24 global deficit of -494,000 MT, the largest shortfall in over 60 years, which had driven prices to multi-year highs. The 2023/24 stocks-to-grindings ratio hit a 46-year low of 27.0%, creating structural scarcity premiums. With 2024/25 projected to deliver the first surplus in four years and production rising 7.4% year-over-year to 4.69 MMT, the market has fundamentally rebalanced.

Outlook

The convergence of adequate supply expectations, weakened global demand indicators, and favorable growing conditions in West Africa creates a challenging environment for price support. While US port inventory tightness offers some downside resistance, the trajectory of supply-demand fundamentals appears tilted toward continued pressure on cocoa futures valuations in the near term.