Global Cocoa Supply Glut Undercuts Price Rally, As West African Harvest Exceeds Expectations

Cocoa prices faced downward pressure on Friday as abundant supply prospects continue to weigh on the market. March contracts on ICE New York fell 89 points (-1.50%), while London March futures declined 43 points (-0.99%), extending weekly losses and pushing NY cocoa to a 1.5-week low.

Supply Surge from West Africa Drives the Bearish Narrative

The primary driver of the recent price weakness stems from unexpectedly robust cocoa production across major West African growing regions. Ideal growing conditions—a blend of adequate rainfall and consistent sunshine—are fostering exceptional cocoa tree blooms and pod development in both the Ivory Coast and Ghana. Farmers report that weather patterns are particularly favorable heading into the harmattan season, with recent dry spells aiding the drying process of harvested beans.

Data from Mondelez indicates that the current cocoa pod count in West Africa stands 7% above the five-year average and materially exceeds last year’s harvest level. The Ivory Coast, accounting for the world’s largest cocoa production share, has commenced its main crop harvest with farmers expressing confidence in crop quality. This optimistic outlook has become directly reflected in port arrivals, with the Ivory Coast receiving 895,544 MT of cocoa during the October 1-December 14 marketing period, representing marginal growth of 0.2% versus the prior year’s comparable timeframe.

Market Pressures and Structural Shifts

Increased shipments to ports are further undercut by structural changes in global inventory dynamics. ICE-monitored cocoa stocks held at US port facilities have compressed to a 9-month minimum of 1,641,641 bags, though this supportive indicator remains overshadowed by ample global supply assessments.

Recent demand-side data reveals concerning trends. Major chocolate manufacturers reported disappointing seasonal sales performance during the Halloween period—typically representing nearly 18% of annual US candy revenues. Cocoa grindings across key regions have contracted sharply: Asia’s Q3 grindings declined 17% year-over-year to 183,413 MT (the lowest for a third quarter in 9 years), while European grindings fell 4.8% to 337,353 MT (a 10-year Q3 low). North American chocolate sales volumes tumbled more than 21% during the 13-week period ending September 7.

Price Support Factors Provide Limited Counterbalance

Several developments have offered temporary price support. Citigroup reduced its 2025/26 global cocoa surplus projection to 79,000 MT from an earlier 134,000 MT estimate, while Rabobank similarly trimmed its 2025/26 surplus forecast to 250,000 MT from 328,000 MT. The International Cocoa Organization’s November revision cut the 2024/25 surplus estimate to 49,000 MT and lowered production forecasts to 4.69 MMT from 4.84 MMT.

Additionally, NY cocoa’s inclusion in the Bloomberg Commodity Index (BCOM) beginning January presents a structural tailwind, with estimates suggesting as much as $2 billion in passive fund buying could flow into contracts during the first week of January. This index inclusion previously helped spark a rally, with NY cocoa reaching 5-week highs before recent pullbacks emerged.

Offsetting Headwinds from Policy and Production

A one-year delay to the EU Deforestation Regulation (EUDR), approved by the European Parliament on November 26, removes near-term supply constraints by extending import permissions for agricultural products from regions with ongoing deforestation activity. This regulatory reprieve effectively undercuts price support mechanisms tied to supply tightening narratives.

Conversely, production weakness in Nigeria—the world’s fifth-largest cocoa producer—offers some price stability. Nigeria’s Cocoa Association projects 2025/26 production will contract 11% year-over-year to 305,000 MT from an expected 344,000 MT in the current crop year.

The fundamental tension between exceptional West African supplies and deteriorating global demand, combined with revised surplus projections, suggests prices remain undercut by structural supply abundance despite targeted index-driven demand and inventory compression dynamics.