Cocoa Markets Face Headwinds as Ample West African Supplies Pressure Futures

Cocoa futures retreated on Wednesday as an improved weather outlook for major producing regions is set to significantly expand harvests. March contracts on ICE New York slipped 20 points (-0.33%) to close lower, while London futures declined 11 points (-0.25%), trimming earlier session gains as climate conditions favorable to crop development dimmed price prospects.

Weather Boost Signals Supply Expansion

Agricultural conditions across West Africa are proving constructive for cocoa tree development. Farmers in the Ivory Coast report that alternating precipitation and clear skies have facilitated robust flowering, while Ghana’s growing regions have experienced consistent moisture supporting pod maturation before the dry harmattan winds arrive. Such beneficial climatic patterns have drawn attention from major chocolate manufacturers—Mondelez indicated that current West African pod counts reached 107% of the five-year average and considerably exceed prior-year levels, signaling a materially stronger harvest ahead.

The world’s top cocoa producer, Ivory Coast, has already commenced its main crop collection, with farmer sentiment about yield and quality running optimistic. Early-year shipments through mid-December totaled 895,544 MT, representing a marginal 0.2% increase from the comparable 2023/24 period.

Mixed Market Signals Complicate the Outlook

Supporting price action earlier in the session came from overnight news that Citigroup slashed its 2025/26 global cocoa surplus projection to 79,000 MT, a substantial revision downward from September’s 134,000 MT forecast. Additionally, ICE-monitored warehouse inventories at U.S. ports contracted to a nine-month floor of approximately 1.64 million bags, underpinning values.

A significant catalyst entered the picture with news that NY cocoa futures will join the Bloomberg Commodity Index beginning January, potentially channeling roughly $2 billion in passive index-tracking fund flows into the contract during the initial trading week.

Demand Weakness Persists Globally

Chocolate consumption figures paint a concerning picture. Hershey’s leadership characterized Halloween season sales performance as underwhelming despite that holiday representing nearly 18% of annual U.S. confectionery purchases. Manufacturing activity reinforced this weakness—Asia’s Q3 cocoa processing declined 17% year-over-year to 183,413 MT, marking the lowest third-quarter grind in nine years. European mills processed 337,353 MT, down 4.8% annually and the smallest Q3 volume in a decade. North American chocolate candy sales volumes contracted over 21% in the 13-week period ending early September versus the prior-year comparison.

Nigeria’s Production Headwinds Offer Limited Support

One countervailing factor emerged from fifth-largest producer Nigeria, where the national Cocoa Association projects a decline of 11% in 2025/26 output to 305,000 MT from the current campaign’s anticipated 344,000 MT. September shipments from Nigeria remained essentially flat year-over-year at roughly 14,511 MT.

Historical Context and the Shift from Deficit to Surplus

The cocoa market has traversed a dramatic arc. The 2023/24 season produced a record deficit of 494,000 MT—the largest shortfall in over six decades—with global stocks hitting their lowest level relative to usage in 46 years at a 27.0% ratio. Global production that year contracted 12.9% to just 4.368 MMT.

The turnaround accelerated when production rebounded 7.4% in 2024/25 to 4.69 MMT, finally returning the market to a modest 49,000 MT surplus, the first in four years. Latest revisions from multiple forecasters suggest this expansionary trend will persist, with improved growing conditions in West Africa likely to extend supplies further into 2025/26.