West Africa's Favorable Weather Conditions Create Fresh Bearish Pressure on Cocoa Market

The cocoa market is facing renewed selling pressure as positive weather patterns across West Africa signal a substantial increase in upcoming supply. March ICE New York cocoa futures have declined 1.48% to hit their lowest level in nearly two weeks, while the London contract dropped 1.11%, extending losses seen throughout the week.

Supply Surge Outweighs Market Concerns

Recent developments suggest the global cocoa market may be shifting decisively toward oversupply. Chocolate manufacturer Mondelez disclosed that West Africa’s current cocoa pod inventory stands 7% above the five-year average and substantially exceeds last year’s corresponding figure. The combination of adequate rainfall and sunshine across Ivory Coast and Ghana is accelerating tree bloom and pod maturation, positioning farmers for a healthy harvest.

Government port data reveals the scale of the incoming supply wave. Ivory Coast cocoa shipments to ports totaled 895,544 metric tons during the marketing year period from October 1 through mid-December, representing a slight 0.2% increase year-over-year from 894,009 MT. The world’s leading cocoa producer is sending products to market at a consistent pace, with optimal weather in Africa facilitating rapid bean drying and harvest completion.

Market Dynamics Reveal Mixed Signals

Despite bearish supply outlooks, the cocoa futures market has found some stabilizing factors. ICE-monitored inventory levels at US ports fell to their lowest in nine months, dropping to 1,642,801 bags, which provides technical support for prices. Additionally, the anticipated inclusion of NY cocoa futures in the Bloomberg Commodity Index beginning in January could attract passive index-tracking investments potentially worth $2 billion in early 2025.

Citigroup’s revised surplus projections for 2025/26 tell the story of a tightening market outlook—the bank cut its estimate to 79,000 MT from a previous September projection of 134,000 MT. Similarly, Rabobank trimmed its full-year surplus forecast to 250,000 MT from 328,000 MT anticipated in November.

Demand Weakness Compounds Price Pressures

Market fundamentals reveal troubling consumption trends. Major chocolate retailers have reported disappointing seasonal sales performance, with one leading manufacturer noting weak Halloween candy volumes. This period typically accounts for nearly 18% of annual US confectionery sales.

Asia’s cocoa grindings experienced a steeper decline, falling 17% year-over-year to 183,413 MT during the third quarter—the smallest Q3 processing volume in nine years. European grindings dropped 4.8% year-over-year to 337,353 MT, marking the lowest third-quarter performance in a decade. North American chocolate candy sales by volume contracted more than 21% over a 13-week period compared to the prior year.

Production Headwinds in Key Regions

Nigeria, ranking as the world’s fifth-largest cocoa producer, projects a significant production decline. The country’s Cocoa Association forecasts 2025/26 output will fall 11% year-over-year to 305,000 MT from the 344,000 MT projected for the current season. This contraction provides limited upside support to the broader market facing abundant supplies elsewhere.

Looking Ahead

The confluence of favorable weather in Africa, robust supply momentum, and subdued global chocolate demand creates a challenging environment for cocoa prices in the near term. While inventory constraints at US distribution points and the prospect of index fund participation offer modest support, the market’s fundamental bias remains decidedly bearish unless consumption indicators improve substantially.