Global Cocoa Seed Supply Tightens as Production Forecasts Face Downward Revision

Cocoa prices surged on Monday, with March ICE NY cocoa advancing 5 points (+0.09%) while March ICE London cocoa climbed 63 points (+1.55%), extending Friday’s rally to mark fresh highs—NY posting a 3.5-week peak and London achieving a 3-week high. The momentum stems from a fundamental shift in global supply expectations that has reshaped market sentiment over the past fortnight.

Production Reality Reshapes Market Outlook

The International Cocoa Organization (ICCO) delivered a significant reassessment on November 28, slashing its 2024/25 global cocoa surplus projection to 49,000 MT—a dramatic 65% cut from the prior 142,000 MT estimate. Concurrent with this downward revision, ICCO lowered global cocoa production forecasts to 4.69 MMT from 4.84 MMT, signaling tightening conditions ahead. This recalibration marks the market’s first surplus in four years, yet the magnitude has compressed substantially compared to earlier expectations, creating support for cocoa seed prices and derivative futures contracts.

Inventory Pressures Amplify Price Support

Warehouse dynamics underscore the tightening backdrop. ICE-monitored cocoa inventories stored at US ports fell to an 8.75-month floor of 1,675,801 bags on Monday, reflecting constrained availability in North American distribution channels. Meanwhile, Ivory Coast port arrivals—critical barometer for world supply—declined 1.8% year-over-year through December 7. Government data revealed farmers shipped 804,288 MT during the October 1-December 7 marketing window, compared to 819,425 MT in the prior-year equivalent, signaling slower-than-expected ingress from the world’s largest producer.

West African Weather: Mixed Signal for Cocoa Seed Development

Weather patterns in cocoa-growing regions present dual narratives. Favorable conditions—including balanced precipitation and sunshine in the Ivory Coast and consistent rainfall in Ghana—are nurturing pod development and accelerating cocoa seed maturation ahead of the harmattan season. Chocolate manufacturers note cocoa pod counts in West Africa sit 7% above five-year averages, suggesting potential near-term abundance. However, this benign outlook conflicts with earlier production guidance, as recent dry periods aided harvested bean quality during the Ivory Coast’s main crop commencement. The disconnect between conducive growing conditions and downward production revisions indicates underlying structural constraints beyond weather.

Demand-Side Deterioration Weighs Against Rallies

Chocolate sector weakness poses headwinds to sustained price appreciation. Hershey’s CEO flagged “disappointing” Halloween chocolate sales despite the holiday accounting for nearly 18% of annual US candy revenue. Cocoa processing data corroborate consumer softness: Asia’s Q3 cocoa grindings plummeted 17% year-over-year to 183,413 MT—the weakest third-quarter volume in nine years. Europe reported Q3 grindings fell 4.8% to 337,353 MT, marking a 10-year low for that quarter. North American grinding gains (+3.2% to 112,784 MT) were distorted by new reporting entities. Retail chocolate sales volumes collapsed more than 21% in Q3, per Circana data.

Policy Reversals and Regional Production Concerns

Regulatory changes have influenced price dynamics. The European Parliament’s November 26 approval of a one-year EUDR (EU Deforestation Regulation) delay signals continued cocoa imports from regions experiencing deforestation pressures, maintaining ample global supply channels. Conversely, the Trump administration’s November 14 announcement eliminating reciprocal tariffs on non-domestic commodities including cocoa, plus rescinding 40% Brazil tariffs, initially destabilized markets by reducing Brazil supply premiums.

A critical constraint emerges from Nigeria, the fifth-largest cocoa producer. Nigeria’s Cocoa Association projects 2025/26 production will contract 11% to 305,000 MT from 344,000 MT in 2024/25, with September exports flat year-over-year at 14,511 MT. This regional production slide, combined with ICCO’s revision away from a structural surplus, explains Monday’s pricing momentum.

Historical Context: From Deficits to Modest Surpluses

The current supply tightening reverses a dramatic multi-year cycle. ICCO’s May 2024 assessment revealed 2023/24 witnessed a -494,000 MT deficit—the worst in 60+ years—driven by cocoa production collapsing 12.9% to 4.368 MMT. Global cocoa seed stocks relative to grindings hit a 46-year nadir of 27.0%. The pivot toward a 49,000 MT surplus represents meaningful improvement, yet remains fragile given demand weakness and regional production uncertainties offsetting yield recovery in West Africa.