Global Cocoa Market Tightens: Supply Contraction Fuels Sharp Price Movement in March Futures

The cocoa futures market experienced significant upward movement on Tuesday, with March ICE NY cocoa (CCH26) gaining 122 points (+2.08%) and March ICE London cocoa #7 (CAH26) advancing 128 points (+3.02%). This rally reflects a fundamental shift in market supply dynamics, driven by substantial revisions to global cocoa availability forecasts.

Supply Estimates Compress, Reshaping Market Expectations

The catalyst for the price surge stems from major adjustments to anticipated global cocoa surplus figures. Analysts now project the 2025/26 global cocoa surplus at just 79,000 MT, down sharply from September’s estimate of 134,000 MT—a reduction that underscores tightening conditions. This contraction in expected surplus represents a narrowing of the gap between supply and consumption demand, fundamentally altering the producer surplus formula that typically governs commodity pricing relationships.

Reinforcing this bullish narrative, the International Cocoa Organization (ICCO) had previously cut its 2024/25 surplus estimate to 49,000 MT from an earlier projection of 142,000 MT, while simultaneously lowering global production expectations to 4.69 MMT from 4.84 MMT. Rabobank also trimmed its 2025/26 surplus forecast to 250,000 MT from 328,000 MT in November.

Inventory Pressures Add Technical Support

Physical supply tightness is reinforced by shrinking inventory levels at US ports. ICE-monitored cocoa stocks held in US ports declined to 1,651,199 bags on Tuesday—a nine-month low that signals constrained availability and supports price momentum through reduced physical supply buffering.

Index Inclusion Catalyzes Passive Fund Demand

An emerging demand catalyst emerged with NY cocoa’s inclusion in the Bloomberg Commodity Index (BCOM) beginning in January. Market participants estimate that passive index-tracking funds could deploy approximately $2 billion into NY cocoa futures contracts during the first week of January, representing a significant structural demand driver.

Production Headwinds in Key Regions

Nigeria, the world’s fifth-largest cocoa producer, faces production challenges. The Nigerian Cocoa Association projects 2025/26 output will decline 11% year-over-year to 305,000 MT from an estimated 344,000 MT in the 2024/25 season. Nigeria’s September exports remained flat year-over-year at 14,511 MT, suggesting limited supply growth in the near term.

Offsetting Bearish Factors: West African Harvest Strength

Counterbalancing these supportive factors, increased cocoa arrivals at Ivory Coast ports present downward price pressure. Government data revealed that Ivory Coast farmers delivered 895,544 MT of cocoa to ports during the 2024/25 marketing year (October 1 through December 14), representing a marginal +0.2% increase from 894,009 MT in the comparable prior-year period. As the world’s largest cocoa producer, Ivory Coast supply dynamics carry outsized market significance.

Recent field conditions in West Africa remain favorable. Chocolate manufacturers reported that the latest pod count in the region stands 7% above the five-year average. Ghana’s farmers noted that favorable weather patterns are accelerating cocoa pod development, while Ivory Coast’s main crop harvest—just beginning—is supported by recent dry weather that has aided bean drying processes.

Weak Demand Pressures Counter Supply Tightness

Global cocoa consumption weakness presents headwinds despite supply constraints. Q3 Asian cocoa grindings fell 17% year-over-year to 183,413 MT—the weakest quarterly result in nine years. European cocoa grindings declined 4.8% year-over-year to 337,353 MT during the same quarter, marking the lowest third-quarter volume in a decade. North American chocolate candy sales volume contracted more than 21% in the 13 weeks ending September 7 compared to the prior year.

The European Parliament’s November 26 approval of a one-year delay to the EU Deforestation Regulation (EUDR) also eased concerns about supply constraints, as the extension allows continued agricultural imports from regions experiencing deforestation activity in Africa, Indonesia, and South America, potentially maintaining ample long-term supply availability.

Market Outlook: Balancing Act Between Supply and Demand

The cocoa market faces competing dynamics where constrained supply from reduced production forecasts and shrinking inventories battles against weak global consumption demand. The narrowing producer surplus—reflecting reduced excess supply availability—typically supports higher pricing, yet tepid chocolate sales and ample near-term West African harvests create countervailing pressure, positioning cocoa futures in a delicate equilibrium between structural supply tightness and cyclical demand weakness.