Global Cocoa Market Faces Downward Pressure as West African Harvests Signal Ample Supply Ahead

Cocoa futures encountered selling pressure on Friday, with March ICE NY cocoa (CCH26) declining by 89 points (-1.50%) and March ICE London cocoa (CAH26) falling 43 points (-0.99%). The decline extends a week-long selloff, pushing NY cocoa to its lowest level in 1.5 weeks. The primary driver undermining prices is the expectation of robust harvest yields across West Africa, with optimal weather patterns currently supporting crop development.

Weather Conditions Set Stage for Bumper Cocoa Harvest

Conditions across the world’s largest cocoa-producing regions are becoming increasingly favorable for growers. In Ivory Coast, farmers report that alternating rainfall and sunshine is stimulating cocoa tree flowering at an accelerated pace. Ghana’s agricultural sector is similarly benefiting, with consistent precipitation supporting pod maturation as growers prepare for the harmattan season. These developments signal a coming production surge that is already weighing on market sentiment.

Mondelez, a major chocolate manufacturer, quantified the supply outlook by noting that current cocoa pod counts in West Africa stand 7% above their five-year average and materially exceed last year’s harvest levels. Early indications from Ivory Coast’s primary crop harvest—which commenced recently—suggest farmers remain optimistic regarding yield quality, further pressuring near-term pricing.

Production Surge Threatens to Overwhelm Demand

The expectation of a bumper cocoa crop has already manifested in increased port arrivals. Government data released Monday revealed that Ivory Coast cocoa shipments to ports reached 895,544 MT during the current marketing year (October 1-December 14), representing a marginal +0.2% increase from 894,009 MT in the comparable prior-year period. While this year-over-year growth appears modest, the sheer volume underscores the scale of supply inundating the market.

Recent dry weather in producing regions has facilitated rapid bean desiccation post-harvest, allowing farmers to move product through the supply chain efficiently. Ghana similarly reported that prevailing conditions are accelerating pod development, indicating production momentum that will likely sustain downward price pressure through the near term.

Compounding supply concerns, the European Parliament approved a one-year postponement of the EUDR (deforestation regulation) on November 26. This delay permits continued EU imports of cocoa and agricultural commodities from regions experiencing deforestation, thereby maintaining access to supplies that might otherwise face restrictions. The regulatory reprieve signals that traditional supply channels remain open, negating any potential bullish supply disruption.

Demand Signals Remain Lackluster

Weak consumption trends compound the bearish supply backdrop. Hershey’s management disclosed disappointing chocolate sales performance during the Halloween season, an occasion that typically accounts for nearly 18% of annual US candy consumption—second only to Christmas. This consumer hesitation raises questions about year-end confectionery demand.

Global cocoa grinding data—a key demand indicator—painted a somber picture in Q3. The Cocoa Association of Asia reported that regional grindings contracted 17% year-over-year to 183,413 MT, marking the lowest Q3 output in nine years. European cocoa grindings declined 4.8% annually to 337,353 MT, representing the weakest third quarter in a decade. North American grindings rose marginally (+3.2% y/y to 112,784 MT), but this gain reflects new reporting entities rather than genuine demand expansion. Circana data underscored weakness, showing North American chocolate candy sales volumes dropped more than 21% in the 13 weeks ending September 7 versus the prior year.

Counterbalancing Factors Offer Limited Support

Despite pervasive bearish signals, certain structural elements provide modest price support. Nigeria, the world’s fifth-largest cocoa producer, is projected to reduce output by 11% year-over-year in 2025/26 to 305,000 MT, down from an expected 344,000 MT in the current crop year. This production decline in a major producing nation offers a minor counterweight to West African abundance.

Inventory dynamics have also shifted favorably. ICE-monitored cocoa stocks held in US ports declined to 1,641,641 bags on Friday, reaching a nine-month nadir. Tightening inventories provide a technical floor for prices, even as fundamental supply-and-demand dynamics remain unfavorable.

Market expectations underwent revision downward in recent weeks. Citigroup’s latest forecast estimates a 2025/26 global cocoa surplus of 79,000 MT, substantially lower than its September projection of 134,000 MT. Similarly, Rabobank trimmed its 2025/26 surplus estimate to 250,000 MT from a November forecast of 328,000 MT. The International Cocoa Organization (ICCO) previously cut its 2024/25 surplus estimate to 49,000 MT (from 142,000 MT) while lowering full-year production forecasts to 4.69 MMT from 4.84 MMT.

A structural development may also support prices: Bloomberg’s decision to include NY cocoa futures in its Commodity Index (BCOM) beginning in January could attract substantial passive fund inflows. Citigroup estimates that this inclusion could generate as much as $2 billion in buying activity during the first week of January, potentially offsetting some current price weakness.

Market Outlook: Supply Abundance Likely to Dominate

The fundamental picture remains weighted toward the bearish side. West African conditions are ripening for a significant harvest, port arrivals are mounting, and global demand indicators suggest consumption remains under pressure. While inventory tightness and Nigeria’s output decline offer tactical support, the overwhelming narrative centers on supply abundance undercutting cocoa values in the months ahead.