Cocoa Market Faces Fresh Headwinds as West Africa Harvests Promise Ample Supplies

On Wednesday, cocoa futures retreated as optimistic harvest forecasts from West Africa’s major growing regions signaled potential supply abundance. March ICE NY cocoa (CCH26) declined 20 points (-0.33%), while March ICE London cocoa (CAH26) slipped 11 points (-0.25%), pulling back from early session gains despite supportive inventory trends.

Demand Weakness Persists Across Key Markets

The fundamental challenge facing cocoa remains subdued global consumption. Q3 Asia cocoa grindings plummeted 17% year-over-year to 183,413 MT—marking the lowest third-quarter processing in nine years, according to the Cocoa Association of Asia. European grindings also contracted, falling 4.8% y/y to 337,353 MT during Q3, reaching a decade-low for that quarterly period. This demand deterioration extends beyond industrial processing. Chocolate candy sales volumes in North America declined sharply, down over 21% in the 13 weeks ending September 7. Halloween season sales proved particularly disappointing for Hershey, as chocolate-maker executives reported weaker consumer engagement during the period that typically accounts for nearly 18% of annual US candy sales.

West African Weather Patterns Boost Crop Prospects

Agricultural conditions across cocoa-producing regions have improved significantly. Ivory Coast farmers report that recent rain combined with sunshine is supporting robust tree development, while Ghana’s agricultural sector has benefited from consistent rainfall ahead of the harmattan season. These favorable weather patterns have generated optimism among producers, with the latest data showing Cocoa pod counts rising 7% above the five-year average—a materially stronger showing than the prior year’s production, according to chocolate manufacturer Mondelez.

Ivory Coast port arrivals substantiate this supply expansion. Government shipping data revealed that farmers delivered 895,544 MT to ports during the current marketing year (October 1 through December 14), representing a marginal 0.2% increase from 894,009 MT in the corresponding period last year. The world’s largest cocoa producer is positioned to sustain these elevated shipment flows into the new harvest season.

Supply-Demand Imbalance Creates Market Uncertainty

The cocoa market’s trajectory has shifted as forecasters recalibrated supply estimates. Citigroup recently reduced its 2025/26 global cocoa surplus projection to 79,000 MT from a September estimate of 134,000 MT. Similarly, Rabobank trimmed its 2025/26 surplus estimate to 250,000 MT from its prior November forecast of 328,000 MT, though this still reflects material surplus conditions. The International Cocoa Organization (ICCO) maintained its 2024/25 surplus estimate at 49,000 MT, marking the first surplus cycle in four years after severe deficits pushed stocks to 46-year lows in the prior season.

Despite these supply adjustments, counterbalancing factors provide some price support. ICE-monitored cocoa inventories at US ports reached a 9-month low of 1,643,161 bags on Wednesday, suggesting potential supply tightness domestically. Additionally, the inclusion of NY cocoa futures in the Bloomberg Commodity Index (BCOM) beginning in January could attract substantial passive fund flows—Citigroup estimates potential buying pressure reaching $2 billion in the first week of January alone.

Structural Headwinds from Policy and Production Declines

Policy developments have complicated supply forecasts. The European Parliament’s November 26 decision to delay the EU Deforestation Regulation (EUDR) by one year permits continued imports of agricultural commodities from regions experiencing ongoing deforestation in West Africa and Indonesia. This regulatory reprieve maintains broader supply availability and continues to weigh on price appreciation.

Countervailing support emerges from production challenges in secondary growing regions. Nigeria, the world’s fifth-largest cocoa producer, faces structural headwinds. The Nigerian Cocoa Association projects production will decline 11% year-over-year to 305,000 MT for the 2025/26 crop year, down from a projected 344,000 MT in the current season. September cocoa exports from Nigeria remained flat year-over-year at 14,511 MT, reflecting limited new supply additions from the region.

Technical and Market Dynamics Ahead

Cocoa futures demonstrated price resilience through late November, briefly rising to 5-week highs amid initial supply tightening concerns, before the momentum faded as West African harvest optimism and weak demand forecasts rose in the market’s attention. Early weakness in BCOM-driven positioning and structural supply-demand imbalances suggest continued volatility may characterize the bay of cocoa traders’ risk landscape through the northern hemisphere winter months. Market participants should monitor port arrivals, emerging grindings data, and policy developments to assess whether structural demand recovery can eventually balance the supply abundance appearing on the horizon.