Cocoa Market Under Pressure: How Abundant Supplies and Weakening Demand Are Reshaping Prices

Global cocoa markets are experiencing significant headwinds as a combination of ample supplies and deteriorating demand continues to exert downward pressure on prices. The shift marks a dramatic turnaround from previous years, fundamentally reshaping the economics of chocolate production and farming.

Market Performance and the Price Collapse

Cocoa futures have entered a sustained decline that shows no immediate signs of reversal. In recent trading, March contracts on both exchanges have extended their downward momentum—with the New York contract reaching a 2.25-year low and the London contract posting a 2.5-year low. This represents more than a month-long deterioration in valuations, signaling persistent weakness in buyer sentiment.

The scale of this reversal is particularly striking when compared to the market dynamics of just two years prior. The International Cocoa Organization previously identified a massive 494,000 MT deficit in 2023/24—the largest shortfall in over 60 years—which had driven prices to unsustainable levels. Today’s reality is fundamentally different, with the market shifting from acute scarcity to abundance.

Supply Abundance Meets Demand Weakness

The convergence of abundant cocoa supplies with collapsing demand has created a perfect storm for price weakness. On the supply side, forecasts from StoneX project substantial surpluses: 287,000 MT for the 2025/26 season and 267,000 MT for 2026/27. The International Cocoa Organization reported that global cocoa stocks climbed 4.2% year-over-year to 1.1 million metric tons, further confirming the oversupply situation.

Demand pressures have proven equally severe. Consumer resistance to elevated chocolate prices is reshaping purchasing patterns across all major markets. Barry Callebaut AG, the world’s largest chocolate processor, reported a 22% collapse in cocoa division sales volume during its most recent quarter, explicitly attributing the decline to “negative market demand and a prioritization of volume toward higher-return segments.” This candid assessment reveals how pricing pressure has fundamentally altered commercial calculus.

Grinding activity—the primary measure of actual cocoa consumption—confirms the weakness. European cocoa grindings fell 8.3% year-over-year to 304,470 MT in Q4, significantly exceeding expectations of a 2.9% decline and marking the lowest fourth-quarter processing in 12 years. Asian grindings declined 4.8% year-over-year to 197,022 MT. Even in North America, traditionally a stable market, grindings managed only a 0.3% increase to 103,117 MT, reflecting subdued consumption across all major regions.

Inventory Build-Up: A Bearish Indicator

Physical stocks held at U.S. ports have rebounded substantially, adding to bearish pressure. After hitting a 10.5-month low of 1.6 million bags in late December, ICE-monitored inventories surged to a 2.5-month high of 1.78 million bags by mid-January. This inventory accumulation typically precedes further price weakness, as suppliers attempt to liquidate overstocked positions.

Regional Production Dynamics: Africa in Focus

The supply picture varies significantly by region, creating divergent implications for future pricing. West African growing conditions have improved substantially, with both the Ivory Coast and Ghana experiencing favorable weather patterns. Cocoa pod counts are running approximately 7% above the five-year average and materially exceed last year’s harvest levels. Both countries report larger and healthier pods, suggesting the February-March harvest will build on this momentum.

Yet paradoxically, abundant supplies have prompted an unexpected response: West African farmers are actively reducing shipments in protest of low prices. Ivory Coast farmers exported 1.20 million metric tons through late January in the current marketing year, down 3.2% from 1.24 million metric tons in the same period a year ago. This represents a deliberate strategy by the world’s largest cocoa producer to withhold supplies in hopes of supporting prices.

Nigeria, the world’s fifth-largest producer, is seeing supplies contract more sharply. November exports fell 7% year-over-year to 35,203 MT, while projections indicate 2025/26 production will decline 11% to 305,000 MT. This regional contraction provides some price support, though insufficient to offset the global surplus.

Shifting Outlooks and Future Implications

The market’s structural situation has evolved considerably since late 2024. The International Cocoa Organization initially estimated a modest 49,000 MT surplus for 2024/25 in December, marking the first surplus in four years after years of deficit-driven tight conditions. Meanwhile, Rabobank recently trimmed its 2025/26 surplus projection to 250,000 MT from an earlier November forecast of 328,000 MT, suggesting some tightening may emerge in the outer years.

This transition from historic shortage to persistent abundance has fundamentally altered investment psychology. Prices that had climbed to punitive levels during the deficit years have surrendered those gains as the reality of ample supplies becomes undeniable. Without a significant disruption to West African production or a dramatic reversal in consumer demand, the cocoa market appears positioned to face continued pressure from the abundance of supply relative to actual consumption needs.