Global Cocoa Market Faces Pressure as Abundant Supply Outlook Weighs on Prices

Cocoa futures traded significantly lower today, with March ICE NY cocoa ( [CCH26]( falling -78 points or -1.50%, while December ICE London cocoa #7 ( [CAZ25]( slipped -36 points or -0.97%. The declines represent a continuation of selling momentum that has driven prices to 1.75-year lows, driven primarily by market expectations of generous global cocoa availability in the coming season.

Supply Optimism Dominates Market Sentiment

The primary catalyst behind the bearish price action stems from the European Union’s anticipated delay of its Deforestation Regulation (EUDR) implementation by an additional year. Last Wednesday, EU member states formally proposed this postponement, effectively extending a grace period that permits continued imports of agricultural commodities including cocoa from regions across Africa, Indonesia, and South America where deforestation pressures remain high. This regulatory flexibility removes a key supply constraint that had previously supported prices.

Reinforcing the ample supply narrative, West African cocoa production indicators suggest a robust harvest ahead. Farmers in Ivory Coast report healthy tree conditions, with recent dry weather facilitating proper bean drying. Ghana’s agricultural sector has similarly benefited from favorable precipitation patterns accelerating pod development. Most notably, chocolate manufacturer Mondelez disclosed that current West African cocoa pod counts stand 7% above their five-year average and materially exceed the previous year’s crop levels. With Ivory Coast’s primary harvest just commencing, farmer optimism about yield and quality remains elevated.

Demand Weakness Amplifies Downward Pressure

Offsetting any supply-side support, global cocoa consumption has shown pronounced weakness across major consuming regions. Chocolate manufacturer Hershey’s management disclosed disappointing sales during the critical Halloween season, which historically comprises nearly 18% of annual US confectionery demand. This demand weakness has manifested in grinding data across key markets. Q3 2024 Asian cocoa grindings contracted 17% year-over-year to 183,413 MT, marking the smallest third-quarter processing volume in nine years. European grindings similarly declined 4.8% year-over-year to 337,353 MT, representing a decade low for third-quarter activity. North American chocolate candy sales volume fell more than 21% during the 13-week period ending September 7 relative to the prior year.

Inventory and Production Dynamics

The global cocoa balance sheet reveals competing forces. ICE-monitored cocoa inventories at US ports declined to an 8.25-month low of 1,723,707 bags Monday, providing modest price support. Port arrivals in Ivory Coast totaled 618,899 MT from October 1 through November 23, down 3.7% from year-ago levels—a modest supply constraint given that Ivory Coast remains the world’s leading producer.

However, production guidance signals strengthening supply. The International Cocoa Organization (ICCO) estimates the 2024/25 crop year will generate a global surplus of 142,000 MT—the first surplus in four years—with global production projected to reach 4.84 MMT, up 7.8% year-over-year. Nigeria, the world’s fifth-largest producer, presents a contrarian production outlook, with its Cocoa Association projecting 2025/26 output declining 11% year-over-year to 305,000 MT.

This confluence of ample supply expectations, demand deterioration, and regulatory environment improvements appears likely to maintain downward price pressure in the near term.