West African Weather Shift Triggers Cocoa Liquidation Wave Across Global Markets

Cocoa futures experienced significant sell-offs on Monday as meteorological conditions in major producing regions improved substantially. March contracts on ICE NY fell 403 points (-6.42%), while the London contract declined 321 points (-7.05%), driven by favorable weather patterns supporting crop development and increased harvest arrivals at regional ports.

Supply Concerns Ease as Harvest Data Points to Abundance

The Ivory Coast, accounting for roughly one-third of global cocoa supply, reported shipments of 895,544 MT through mid-December—a marginal 0.2% increase from the prior year period. This steady flow of cocoa arriving at ports reflects improved growing conditions, with farmers noting well-balanced precipitation and sunshine that’s facilitating pod development. Ghana’s agricultural reports similarly indicate accelerated cocoa pod maturation due to recent climate patterns.

Chocolate manufacturer Mondelez disclosed that current West African cocoa pod counts stand 7% above the five-year average, signaling a materially stronger harvest compared to last year. Such abundance contradicts earlier expectations of supply constraints that had driven prices to 1.75-year lows just weeks prior.

Policy Reversals and Tariff Changes Remove Previous Price Supports

On November 26, the European Parliament approved a one-year postponement of its deforestation regulation (EUDR), permitting continued agricultural imports from Africa and Indonesia where forest clearing persists. The delay immediately weakened prices by removing a supply-tightening catalyst. Additionally, the Trump administration’s decision to eliminate 10% reciprocal tariffs on non-US commodities including cocoa, along with a reversal of Brazil’s 40% food import tariff, eliminated upside momentum from trade policy uncertainty.

Consumption Indicators Flash Weakening Demand Signals

Global cocoa grinding data reveals troubling demand dynamics. Asia’s Q3 cocoa grindings contracted 17% year-over-year to 183,413 MT—marking the lowest third-quarter volume in nine years. European cocoa grindings fell 4.8% annually to 337,353 MT, representing a 10-year low for the quarter. While North American grindings rose 3.2% to 112,784 MT, data distortion from new reporting participants clouds the picture.

Retail chocolate sales corroborate this weakness. Hershey’s CEO described Halloween season chocolate demand as “disappointing,” while North American chocolate candy sales plummeted over 21% in the 13-week September period versus year-ago levels. Given Halloween’s 18% share of annual US candy sales, this contraction signals deeper consumer softening.

Supply Tightening in Secondary Producing Regions Provides Partial Support

Nigeria, the world’s fifth-largest cocoa producer, presents a counterbalance to West African abundance. The Nigerian Cocoa Association projects 2025/26 output will decline 11% year-over-year to 305,000 MT from an estimated 344,000 MT in 2024/25. However, this regional weakness remains insufficient to offset improved prospects in primary growing zones.

ICE-monitored inventory levels demonstrate additional complexity. US warehouse cocoa stocks fell to a nine-month low of 1,655,457 bags, providing technical support by indicating tightening American supplies despite global abundance.

Index Inclusion Offers a Bright Spot for Future Buying Interest

New York cocoa futures will join the Bloomberg Commodity Index (BCOM) starting in January, potentially attracting passive commodity fund flows. Citigroup estimates this inclusion could trigger approximately $2 billion in buying pressure during January’s first week, providing a medium-term price floor for those positioned ahead of the index rebalance.

Market Outlook: Competing Pressures Define Direction

The recent cocoa sell-off reflects the market repricing multiple shifts simultaneously—from mounting supply confidence in West Africa and easing policy headwinds to weakening consumption across Asia and North America. While Nigeria’s production challenges and depleted US inventory levels offer bulls some ammunition, the fundamental supply-demand rebalancing suggests prices may remain under pressure absent new supply disruptions or unexpected demand revival.