West Africa's Favorable Conditions Settle Cocoa Market Sentiment as Supply Outlook Shifts

Cocoa futures concluded Thursday’s session on a softer note, with ICE NY cocoa retreating 44 points (-0.74%) while March London cocoa dropped 24 points (-0.55%) to establish fresh lows for the week. The pullback reflects market reassessment of global supply dynamics, as benign weather patterns across major growing regions are expected to bolster pod yields and overall availability.

Supply Resilience Takes Center Stage

West African cocoa-producing nations are reporting encouraging agricultural conditions heading into the harvest period. Ivory Coast cultivators have benefited from a combination of precipitation and clear skies, fostering robust bloom cycles among cocoa trees. Similarly, Ghanaian farmers have experienced consistent rainfall that supports both tree health and pod maturation during the pre-harmattan window. Industry participant Mondelez International highlighted that current pod inventories in West Africa stand 7% above their five-year mean, with counts substantially exceeding the prior marketing year’s baseline.

The Ivory Coast’s primary harvest has commenced with farmer confidence running high regarding crop quality. However, shipping data tells a nuanced story: port arrivals totaled 895,544 MT from October through mid-December, representing a marginal +0.2% increase versus the comparable year-ago timeframe. This modest expansion suggests measured rather than aggressive supply momentum.

Inventory Dynamics Provide Price Support

Countering bearish supply narratives, ICE warehouse stocks have tightened considerably. US port cocoa inventories contracted to a nine-month nadir of 1,642,801 bags by Thursday’s close, offering underlying price support despite softer sentiment. This inventory constriction stands in contrast to projections of ample supplies that previously weighed on values.

Market Catalysts and Structural Shifts

A pivotal development emerged when Citigroup recalibrated its 2025/26 surplus forecast downward to 79,000 MT from a September projection of 134,000 MT, providing temporary price stabilization. The International Cocoa Organization similarly adjusted its 2024/25 production estimate to 4.69 MMT, with a revised surplus of 49,000 MT representing the sector’s first balanced year in four years.

Futures traders are anticipating significant structural demand when Bloomberg Commodity Index (BCOM) inclusion commences in January—NY cocoa’s addition could catalyze approximately $2 billion in passive fund inflows during the index transition period, potentially supporting price momentum.

Demand Weakness Compounds Pricing Pressure

Offsetting supportive inventory and index-inclusion narratives, global chocolate consumption metrics have deteriorated. Hershey’s executives characterized this Halloween season’s chocolate demand as disappointing, particularly significant given that the holiday typically represents 18% of annual US confectionery sales. Asian cocoa grindings plummeted 17% year-over-year to 183,413 MT in Q3—the weakest quarterly result in nine years—while European processors reduced throughput 4.8% to 337,353 MT, marking a decade low for Q3 activity. North American chocolate candy volumes declined over 21% across the 13-week period ending September 7.

Production Headwinds from Secondary Origins

Nigeria, the world’s fifth-largest cocoa supplier, faces production contraction. The nation’s Cocoa Association projects 2025/26 output will contract 11% year-over-year to 305,000 MT, representing a meaningful supply loss that counters abundant West African production elsewhere. September export levels from Nigeria held flat at 14,511 MT, providing limited relief.

Regulatory Backdrop and Market Context

European Union deforestation policy delays have inadvertently sustained global supply assumptions. The November 26 parliamentary decision to postpone EUDR implementation by one year permits continued agricultural imports from African and Southeast Asian regions, preserving supply accessibility for EU manufacturers and maintaining price-dampening abundant-supply narratives.

Cocoa’s trajectory remains contingent on how index inclusion demand reconciles against persistent consumption weakness and expanding West African harvests as the calendar advances into 2025.