West Africa Weather Conditions Push Cocoa Futures Lower Amid Supply Surplus Outlook

Market Downturn Signals Shift in Commodity Dynamics

Cocoa contracts experienced significant losses during Monday’s trading session, with March delivery on ICE New York declining 403 points (-6.42%) and its London counterpart falling 321 points (-7.05%). The selloff reflects a confluence of bearish factors reshaping the cacao market landscape, from favorable crop conditions to changing global supply expectations.

Benign Weather Patterns Support Crop Development

The primary catalyst for the price decline stems from improved meteorological conditions across West Africa’s primary production zones. Cocoa farmers operating in both the Ivory Coast and Ghana have reported balanced precipitation patterns combined with adequate sunshine, fostering robust pod development. This weather favorability has triggered substantial long-position liquidation across cocoa futures contracts, as traders reassess supply tightness assumptions.

Port data underscores the impact of these conditions. The Ivory Coast, responsible for approximately 40% of global cocoa output, saw farmers deliver 895,544 MT to export terminals during the October 1 through December 14 period—a marginal 0.2% increase from 894,009 MT in the corresponding year-ago window. While the uptick appears modest, it signals maintained supply momentum during a critical marketing window.

Supply Surplus Narrative Gains Traction

Recent commodity organization assessments have substantially revised their global balance projections. On November 28, the International Cocoa Organization slashed its 2024/25 global cacao surplus estimate to 49,000 MT from an earlier projection of 142,000 MT, while simultaneously cutting production forecasts from 4.84 MMT to 4.69 MMT. Rabobank followed suit, reducing its 2025/26 surplus estimate to 250,000 MT from a November forecast of 328,000 MT.

These corrections acknowledge the reality of ample West African harvests. Chocolate manufacturer Mondelez reported that current pod counts in West Africa stand 7% above the five-year average, materially exceeding the prior season’s output. The Ivory Coast’s main harvest window has recently commenced with farmer sentiment tilting optimistic regarding crop quality.

Demand Weakness Compounds Price Pressure

Consumption indicators across major processing regions paint a sobering picture. The Cocoa Association of Asia documented a 17% year-over-year decline in Q3 grindings, reaching 183,413 MT—the smallest third-quarter result in nine years. European processing facilities saw Q3 grindings contract 4.8% annually to 337,353 MT, marking a decade-low for the period. North American sales volume of chocolate confectionery fell more than 21% during the 13-week period ending September 7, compared to year-ago levels.

These consumption headwinds follow disappointing Halloween chocolate sales, an event historically accounting for nearly 18% of annual U.S. candy revenues.

Policy Adjustments Extend Supply Availability

Regulatory developments have reinforced bearish sentiment. The European Parliament’s November 26 approval of a one-year deforestation regulation delay permits continued importation of agricultural products from regions experiencing forest loss, effectively keeping supply channels open. The Trump administration’s November 14 announcement to eliminate reciprocal tariffs on non-domestic commodities, including cacao, alongside reductions in Brazilian import duties, has similarly supported the case for ample supplies.

Offsetting Bullish Factors Face Headwinds

Index inclusion provided some fundamental support. The addition of NY cocoa futures to the Bloomberg Commodity Index beginning January could attract passive fund allocations, with Citigroup estimating potential purchases reaching $2 billion in early January. ICE warehouse inventories monitored at U.S. ports fell to a nine-month minimum of 1,655,457 bags, providing modest technical underpinning.

However, Nigerian production constraints offer limited countervailing support. The country’s Cocoa Association projects 2025/26 output will contract 11% to 305,000 MT from the prior 344,000 MT, yet this supply reduction in the world’s fifth-largest producing nation remains insufficient to offset broader global abundance.

Market Outlook and Technical Positioning

The fundamental shift from multi-year deficit conditions to surplus expectations has reset trader positioning. The recent five-week price highs observed last Thursday appear to have attracted sufficient selling pressure to exhaust near-term momentum. With West African harvests proceeding favorably and global processing demand showing weakness, the near-term price trajectory favors further consolidation before any recovery catalysts emerge.