West African Weather Boost Sends Cocoa Markets Lower as Supply Outlook Brightens

Cocoa futures retreated sharply this week, with March contracts falling across major exchanges. NY cocoa futures dropped 1.48% while London cocoa slipped 1.11%, pushing prices to their lowest levels in over a week. The primary driver behind this weakness stems from increasingly optimistic harvest conditions across West Africa’s key cocoa-producing regions.

Weather Pattern Supports Strong Crop Development

Farmers across the primary cocoa-producing nations are reporting ideal growing conditions. In the Ivory Coast, recent rainfall combined with sunshine has triggered robust cocoa tree blooming, while Ghana has experienced consistent precipitation that’s accelerating pod development. These favorable meteorological patterns have bolstered farmer sentiment heading into the harmattan season, traditionally a critical period for pod maturation.

Chocolate manufacturers are already factoring in the improved supply picture. Recent pod counting surveys show West African cocoa counts running approximately 7% above their five-year historical average, with volumes notably exceeding last year’s production levels. The Ivory Coast’s main harvest is now underway, with growers expressing confidence in crop quality.

Supply Pressures Mount from Multiple Directions

Port activity data reinforces the bearish supply narrative. Shipments from the world’s largest cocoa producer totaled 895,544 metric tons during the new marketing year’s opening quarter, representing a marginal 0.2% increase year-over-year. This modest growth suggests adequate supply flows without supply tightness concerns.

However, not all supply-side developments prove negative. ICE warehouse inventories have tightened considerably, with monitored stocks in US ports declining to a 9-month low of approximately 1.64 million bags. This reserve compression provides a counterbalance to the ample production forecasts.

Demand Signals Remain Mixed

Global consumption trends present a conflicting picture for cocoa prices. Asian cocoa grinding volumes contracted 17% year-over-year during the third quarter, marking the weakest Q3 performance in nine years. European grindings similarly weakened, declining 4.8% annually to reach decade-low levels for a third quarter. North American chocolate sales volumes have deteriorated sharply, falling more than 21% in recent weeks compared to the prior year period.

Nevertheless, chocolate consumption data contains some anomalies. North American grinding data showed modest gains, though industry analysts attributed this partly to the inclusion of new reporting participants rather than genuine demand strength.

Conflicting Signals from Supply Forecasts

Financial institutions have sharply revised their supply expectations in recent weeks. Citigroup has dramatically cut its 2025/26 global surplus projection to 79,000 metric tons from a prior 134,000-metric-ton estimate. Agricultural bank Rabobank similarly reduced its surplus forecast to 250,000 metric tons from 328,000 metric tons projected just weeks earlier.

These revisions reflect a shifting assessment from the International Cocoa Organization, which previously estimated a 49,000-metric-ton surplus for 2024/25—the first surplus after four consecutive deficit years. Global production for 2024/25 is projected to rise 7.4% annually to 4.69 million metric tons.

Support From Index Inclusion and Regional Production Declines

Cocoa futures will receive structural support beginning in January, when NY cocoa contracts gain inclusion in the Bloomberg Commodity Index. Analysts estimate this designation could attract approximately $2 billion of passive fund inflows during the initial trading week, potentially providing price support.

Regional production challenges in secondary growing nations offer additional support. Nigeria, the world’s fifth-largest cocoa producer, faces a projected 11% production decline to 305,000 metric tons in the 2025/26 crop year. This reduction constrains potential global supply growth despite West African expansion.

Policy Uncertainty and Market Direction

Recent regulatory developments have complicated the supply picture. European Parliament approval of a one-year delay to deforestation legislation (EUDR) removes near-term supply constraints, allowing continued agricultural imports from deforestation-prone regions. This policy delay initially pressured prices by extending the ample supply outlook.

Cocoa markets remain sensitive to the balance between expanding West African yields and weakening global demand. While immediate weather advantages point lower, structural support from inventory tightness and upcoming index inclusion could stabilize prices in coming weeks.