West African Weather Shifts Cocoa Market Dynamics: Prices Pull Back Amid Supply Expansion

Monday’s commodity futures session witnessed a significant retreat in cocoa valuations as favorable precipitation across major producing regions shifted market sentiment. March contracts on ICE New York fell 403 points to close at -6.42%, while the London exchange saw comparable weakness with a 321-point decline representing a -7.05% drop. This pullback reflects a broader reassessment of supply tightness that had driven prices to five-week peaks just days earlier.

Climatic Conditions Drive Supply Expansion

The price correction stems from improving agricultural conditions in West Africa’s critical growing zones. Cocoa farmers throughout the Ivory Coast and Ghana are reporting optimal growing conditions—a balanced combination of rainfall and sunshine that has accelerated cacao pod maturation and overall crop development. These meteorological conditions have proven particularly supportive for the drying of harvested beans, while simultaneously delaying the onset of seasonal Harmattan winds that typically constrain supplies.

Port activity data underscores growing supply momentum. Ivory Coast shipments through mid-December reached 895,544 MT during the current marketing cycle, representing a marginal +0.2% increase from 894,009 MT in the equivalent prior-year period. As the world’s foremost cocoa supplier, Ivory Coast’s expanding arrivals have pressured prices downward, triggering liquidation across cocoa futures positions.

Recent Supply Outlook Revisions Signal Meaningful Shift

The severity of Monday’s selloff reflects dramatic reversals in production forecasts released just weeks earlier. On November 28, the International Cocoa Organization substantially trimmed its 2024/25 global surplus projection to 49,000 MT, a reduction from 142,000 MT previously estimated—an indication that prior surplus expectations have deteriorated significantly. Concurrently, ICCO reduced its production forecast for 2024/25 to 4.69 million metric tons from 4.84 MMT initially projected.

Rabobank’s independent assessment corroborated this bearish reassessment, cutting its 2025/26 surplus estimate to 250,000 MT from a November projection of 328,000 MT. These downward revisions contrast sharply with the optimistic supply environment now materializing across West Africa, where harvests are advancing with momentum.

Demand Weakness Compounds Pressure

Beyond supply expansion, weakening global chocolate consumption has intensified downward pricing pressure. Q3 cocoa grindings—an indicator of chocolate production activity—declined substantially across major consuming regions. Asia recorded a -17% year-over-year contraction to 183,413 metric tons, marking the weakest third-quarter performance in nine years. European grindings retreated -4.8% year-over-year to 337,353 MT, the lowest Q3 level in a decade.

North American confectionery demand presented particularly concerning signals. Despite reported Q3 grindings growth of +3.2% to 112,784 MT, underlying chocolate sales volume fell more than -21% during the 13-week period ending September 7, compared to the prior year. The Halloween 2024 season—representing nearly 18% of annual US candy sales—disappointed major chocolate manufacturers including Hershey, signaling softer consumer purchasing momentum heading into the calendar year.

Support Emerges from Structural Factors

Market participants identified several offsetting supportive factors. ICE-monitored inventory levels in US ports compressed to a nine-month low of 1,655,457 bags, creating technical support for valuations. Additionally, NY cocoa’s inclusion in the Bloomberg Commodity Index commencing January represents a structural catalyst. Citigroup analysts project potential passive fund purchases reaching $2 billion during the index-inclusion debut week, which may provide intermediate price support.

Nigeria, the world’s fifth-largest cocoa supplier, presents an additional supportive element. The Nigerian Cocoa Association projects 2025/26 production will decline -11% year-over-year to 305,000 MT from the current 344,000 MT crop year estimate, limiting potential global supply augmentation from this region.

Policy Environment Shifts

Recent regulatory developments have weighed on price expectations. The European Parliament’s November 26 decision to delay implementation of the EU Deforestation Regulation (EUDR) by one year permits continued imports of cocoa and other commodities from deforestation-active regions in Africa and Indonesia. This extension sustains expectations for ample supply availability. Simultaneously, the Trump administration’s November 14 announcement eliminating the 10% reciprocal commodity tariff on non-US-grown cocoa and reducing Brazil tariffs from 40% to baseline levels has removed additional bullish price supports.

The market environment reflects a complex interplay between structural supply expansion and temporary demand softness, with technical factors positioning intermediate trading ranges around current depressed valuations.