Global Cocoa Supply Tightens While Index Buying Continues to Support Prices

Cocoa futures markets showed mixed performance with divergent movements across exchanges. March ICE NY cocoa climbed +26 points (+0.44%), while March ICE London cocoa declined -87 points (-2.02%). The continued price support on the New York exchange reflects anticipation surrounding major institutional buying flows tied to cocoa’s addition to the Bloomberg Commodity Index (BCOM) beginning in January. Citigroup analysts project this index inclusion could generate approximately $2 billion in fresh buying volume for NY cocoa futures.

Supply Dynamics Paint a Tighter Picture

Recent developments on the supply front have reinforced bullish sentiment. ICE-monitored cocoa stockpiles stored at US ports sank to a fresh 9.5-month trough of 1,626,861 bags as of Tuesday, signaling constrained availability. This inventory compression comes against the backdrop of a dramatically revised supply outlook from global authorities.

The International Cocoa Organization made a significant cut to its 2024/25 global surplus estimate in November, slashing it to just 49,000 MT from an earlier forecast of 142,000 MT. Production projections were also trimmed, falling to 4.69 MMT from 4.84 MMT previously. Adding to this tightening narrative, Rabobank trimmed its 2025/26 global surplus estimate to 250,000 MT from a prior November projection of 328,000 MT. These downward revisions mark the first projected surplus after four consecutive years of deficits.

Challenges in producing regions further underpin the supply story. Nigeria, the world’s fifth-largest cocoa producer, faces headwinds with its Cocoa Association projecting a -11% year-over-year decline in 2025/26 output to 305,000 MT. Nigeria’s September cocoa exports remained flat at 14,511 MT compared to the prior year.

Weather-Driven Crop Developments in West Africa

Favorable weather patterns in key producing regions have supported the 2024/25 harvest outlook. Ivory Coast farmers have reported encouraging conditions with a beneficial mix of rainfall and sunshine promoting cocoa tree blooming. Similarly, Ghanaian farmers noted consistent, timely rains aiding tree and pod development ahead of the upcoming harmattan season. Chocolate manufacturer Mondelez highlighted that the latest pod count across West Africa stands 7% above the five-year average and “materially higher” relative to last year’s harvest.

The main crop harvest in Ivory Coast—the world’s top cocoa producer—has commenced with farmers expressing optimism regarding crop quality. During the new marketing year from October 1 through December 21, Ivory Coast farmers delivered 970,945 MT of cocoa to ports, representing a marginal -0.1% year-over-year comparison to the same period last year.

Demand Weakness Counters Supply Tightness

Despite supportive supply conditions, weak consumption patterns globally present a contrarian headwind. Confectionery demand proved disappointing during the recent Halloween season, with Hershey’s leadership citing underwhelming chocolate sales. Given that Halloween typically accounts for approximately 18% of annual US candy sales—second only to Christmas—this weakness rippled across demand indicators.

Regional grindings data underscored soft consumption. Asian cocoa grindings fell -17% year-over-year in Q3 to 183,413 MT, marking the smallest third-quarter volume in nine years. European grindings dropped -4.8% year-over-year to 337,353 MT, the lowest Q3 figure in a decade. While North American grindings edged up +3.2% year-over-year to 112,784 MT in Q3, the expansion reflects methodological changes with new reporting entities rather than true organic growth. North American chocolate sales volume contracted sharply, declining over -21% during the 13-week period ending September 7 compared to year-earlier levels.

Policy Tailwinds Extend Further

Regulatory relief added continued momentum to cocoa market sentiment. The European Parliament approved a one-year postponement to the deforestation regulation (EUDR) on November 26, enabling EU nations to sustain agricultural imports from African, Indonesian, and South American regions experiencing deforestation. This delay helps maintain ample cocoa supply channels, offsetting potential supply disruptions that enhanced regulations might have triggered.

The interplay between structural supply tightening, seasonal demand softness, and index-driven institutional inflows suggests continued market complexity as traders navigate competing fundamentals.