West Africa's Adequate Supply Outlook Pressures Cocoa Prices to Multi-Week Lows

Cocoa futures retreated on Thursday as market participants increasingly price in abundant supply prospects. March ICE NY cocoa (CCH26) dropped 44 points, finishing -0.74%, while March ICE London cocoa (CAH26) fell 24 points to close -0.55%. The downside move pushed NY cocoa to its weakest level in a week.

Favorable Growing Conditions Signal Bumper Crop

The primary headwind for prices stems from improved agricultural conditions across major producing regions. Ivory Coast and Ghanaian farmers have reported ideal growing weather—a combination of timely rainfall and sunshine supporting cocoa tree blooming and pod development before the harmattan season arrives. This optimism translated into concrete data when Mondelez disclosed that West Africa’s current cocoa pod count sits 7% above its five-year average, and “materially exceeds” the prior year’s harvest levels.

The world’s leading cocoa producer is entering peak harvest season for its main crop, with farmers expressing confidence about crop quality. Such developments typically weigh on futures prices as traders anticipate ample supply in the global marketplace.

Mixed Signals from Global Supply Estimates

However, the macro picture remains nuanced. Citigroup recently adjusted its 2025/26 global cocoa surplus projection downward to 79,000 MT from a prior September estimate of 134,000 MT. This revision, while still indicating surplus conditions, reflects tightening expectations. Similarly, Rabobank trimmed its 2025/26 surplus forecast to 250,000 MT from November’s 328,000 MT projection.

These revisions provide some price support, yet the broader outlook of adequate global supply continues to dominate trader sentiment.

Inventory Levels Offer Limited Relief

One structural positive for cocoa values lies in declining ICE-monitored inventories. US port holdings fell to a nine-month low of 1,642,801 bags on Thursday. Reduced visible supply typically provides underlying price support, though this factor appears insufficient to overcome the bearish implications of forthcoming West African abundance.

Index Inclusion Could Spark Passive Buying

A potential catalyst for price appreciation emerged when NY cocoa futures secured inclusion in the Bloomberg Commodity Index (BCOM) beginning January. Citigroup estimates this move could trigger approximately $2 billion in passive fund inflows within the first week of January, benefiting NY cocoa contracts specifically.

Shipment Volumes Highlight Ample Supply Chain

Fresh government data reinforced supply concerns. Ivory Coast cocoa shipments to ports totaled 895,544 MT from October 1 through December 14—up marginally 0.2% versus the year-ago period’s 894,009 MT. The consistency of high-volume arrivals confirms the region’s ability to sustain adequate export flows.

Weak Demand Compounds Price Pressures

Beyond supply abundance, demand weakness has exacerbated downside pressure. Hershey’s CEO characterized Halloween 2024 chocolate sales as “disappointing,” despite Halloween accounting for nearly 18% of annual US candy revenues. Asia-Pacific cocoa grindings (a demand proxy) contracted 17% year-over-year in Q3 to 183,413 MT—the lowest third-quarter processing in nine years. European grindings similarly fell 4.8% year-over-year to 337,353 MT, marking the weakest Q3 in a decade.

North American chocolate candy sales volume dropped more than 21% over the 13 weeks ending September 7, signaling pronounced consumer demand softness in key markets.

Deforestation Regulation Delay Maintains Supply Outlook

The EU’s one-year postponement of its deforestation regulation (EUDR) on November 26 removed import restrictions on agricultural products from deforestation-prone regions in Africa and Southeast Asia. Extended market access sustains adequate supply expectations for the global chocolate industry.

Nigeria Production Concerns Offer Limited Balance

A countervailing factor exists in Nigeria, the world’s fifth-largest producer. The country’s Cocoa Association projects 2025/26 output will decline 11% year-over-year to 305,000 MT from the prior year’s estimated 344,000 MT. While production cuts in secondary origins provide minimal price support, they fail to offset West Africa’s dominant supply position.

The cocoa market’s current trajectory reflects traders’ assessment that global supply conditions will prove adequate, outweighing temporary supportive factors like reduced inventory levels and upcoming index inclusion activity.