West African Cocoa Supply Surge Pressures Market Despite Production Headwinds

The cocoa futures market is navigating conflicting signals this week, with near-term price pressure from improving harvest conditions offset by structural supply concerns emerging later in the crop cycle. Understanding these crosscurrents requires examining both the immediate weather outlook and the longer-term supply trajectory.

Current Market Positioning

March contracts reflect the cautious sentiment: NY cocoa fell to a 1.5-week low, declining 88 points (-1.48%), while London’s March contract dropped 48 points (-1.11%). This continuation of the week’s sell-off stems primarily from favorable atmospheric conditions in the world’s largest cocoa-producing region. Ivory Coast and Ghana farmers are reporting optimal growing patterns—a combination of regular rainfall and adequate sunshine—that promise robust pod development heading into the peak harmattan season.

The tangible impact of this agricultural advantage is already visible in supply metrics. Port arrivals data from the Ivory Coast revealed 895,544 MT of cocoa delivered through December 14, a marginal 0.2% increase year-on-year, yet the main harvest is only beginning. Chocolate manufacturer Mondelez independently verified that current pod counts across West Africa stand 7% above the five-year baseline and “materially higher” than the prior season, signaling substantial production potential.

Supply Abundance Versus Demand Realities

What complicates this bearish supply narrative is the persistent weakness in downstream cocoa consumption. Q3 grindings data paints a stark picture of lackluster demand:

• Asian cocoa grindings contracted 17% year-over-year to 183,413 MT—the lowest third-quarter volume in nine years
• European grindings declined 4.8% to 337,353 MT, marking the worst Q3 in a decade
• North American chocolate sales volume tumbled over 21% in the 13-week period ending September 7

This demand erosion materialized despite tactical support—North American Q3 grindings rose 3.2%, though this figure was inflated by new reporting participant additions. The underlying consumption picture remains depressed, with Halloween chocolate sales disappointing major manufacturers like Hershey, despite the holiday representing nearly 18% of annual US candy revenue.

Policy and Supply Architecture

The European Parliament’s November 26 decision to delay deforestation regulations (EUDR) by one year inadvertently supports elevated cocoa supplies. By postponing agricultural import restrictions targeting deforestation-linked commodities, EU policymakers preserved access to African and Indonesian cocoa production, keeping supplies ample at a time of weak pricing.

Conversely, a structural supply constraint is building in Nigeria, the world’s fifth-largest producer. The Nigerian Cocoa Association projects a production decline of 11% for the 2025/26 cycle, with output falling to 305,000 MT from a projected 344,000 MT in the current year. This anticipated deficit in secondary supply regions stands in stark contrast to West African abundance.

Forward Guidance and Market Drivers

Analyst revisions reveal the complex supply calculus investors face. Citigroup recently adjusted its 2025/26 global surplus forecast downward to 79,000 MT from a September projection of 134,000 MT—a material reduction reflecting tighter supply expectations over the medium term. Rabobank similarly trimmed its 2025/26 outlook to 250,000 MT from 328,000 MT in November.

These cuts follow the International Cocoa Organization’s late-November reassessment, which slashed the 2024/25 surplus estimate to 49,000 MT from 142,000 MT previously, alongside a 2.9% downward revision in global production to 4.69 MMT. This represents the market’s first surplus in four years following the catastrophic 2023/24 deficit of 494,000 MT—the largest in over 60 years—when global stocks-to-grindings ratios hit a 46-year low.

Technical and Structural Support

Cocoa futures received a boost when ICE-listed inventory levels fell to a nine-month nadir of 1,642,801 bags, providing underlying price support amid the supply recovery narrative. More significantly, NYSE cocoa’s upcoming inclusion in the Bloomberg Commodity Index beginning January represents a potential inflection point. Citigroup estimates this passive index inflows could direct approximately $2 billion into NY cocoa futures during the first week of January alone—a substantial technical catalyst that drove recent 5-week highs.

Market Outlook

The cocoa market appears caught between two opposing forces: the immediate beneficiary of favorable West African growing conditions that depress near-term pricing, yet anchored by medium-term supply tightening and indexed inflows that could stabilize or lift valuations. Traders monitoring this commodity must weigh favorable agricultural conditions in the near term against structural deficits in the supply balance and demand dynamics that remain subdued globally.