Global Cocoa Surplus Shrinks Dramatically, Triggering Sharp Price Rally in Futures Markets

Cocoa futures experienced significant upward momentum on Tuesday, with March ICE New York cocoa contracts climbing +122 points (+2.08%) and March ICE London cocoa advancing +128 points (+3.02%). The rally reflects a major shift in market sentiment regarding the global supply outlook. Citigroup’s revised forecast proved to be the catalyst, slashing its 2025/26 global cocoa surplus projection from 134,000 MT down to just 79,000 MT—marking a dramatic 41% reduction from previous estimates.

Supply Tightening Fuels Bullish Momentum

Beyond Citigroup’s downward revision, multiple factors are aligning to support higher cocoa valuations. Inventory levels at ICE-monitored warehouses in US ports fell to a fresh 9-month low of 1,651,199 bags on Tuesday, intensifying the supply squeeze narrative. Rabobank also trimmed its 2025/26 surplus forecast to 250,000 MT from 328,000 MT, signaling broader consensus that global cocoa availability is tightening faster than previously anticipated.

The cocoa market is also receiving structural support from index inclusion mechanics. Beginning in January, New York cocoa futures will be incorporated into the Bloomberg Commodity Index (BCOM), potentially unlocking substantial passive capital inflows. Citigroup estimates that BCOM inclusion alone could trigger approximately $2 billion in cocoa futures purchases during the first week of January as fund managers rebalance their commodity allocations.

Production Headwinds Across Major Growing Regions

Nigeria, the world’s fifth-largest cocoa producer, is experiencing notable supply challenges. The Nigerian Cocoa Association projects a -11% year-over-year production decline in 2025/26, forecasting output to fall from 344,000 MT to 305,000 MT. September cocoa export data from Nigeria remained flat year-over-year at 14,511 MT, suggesting limited capacity expansion.

The International Cocoa Organization (ICCO) reinforced the bullish supply narrative in late November, slashing its 2024/25 global cocoa surplus estimate to 49,000 MT from the previous 142,000 MT forecast. The organization also lowered its full-year 2024/25 production estimate to 4.69 MMT from 4.84 MMT, highlighting that production growth is lagging earlier expectations.

Offsetting Factors: Ivory Coast Shipments and Weak Demand

A countervailing bearish factor emerged Monday when government data revealed that Ivory Coast farmers—representing the world’s largest cocoa producer—shipped 895,544 MT to ports during the new marketing year (October 1 through December 14), up marginally +0.2% from 894,009 MT in the same period last year. This steady flow of cocoa arrivals maintains some downward price pressure.

Global cocoa grindings data, a leading demand indicator, tells a concerning story. Q3 cocoa grindings fell -17% year-over-year across Asia to 183,413 MT—the smallest Q3 tally in 9 years. European grindings declined -4.8% year-over-year to 337,353 MT, marking the lowest third-quarter result in a decade. While North American grindings rose +3.2% year-over-year to 112,784 MT, this gain was partially attributable to new reporting companies, making the underlying demand picture ambiguous.

Broader chocolate consumption metrics reinforce weak demand concerns. Hershey’s CEO characterized Halloween chocolate sales in October as “disappointing,” despite the holiday accounting for nearly 18% of annual US candy sales. Over the 13 weeks ending September 7, North American chocolate candy sales volume contracted more than -21% compared to the prior-year period, according to Circana research.

Historical Context and Market Perspective

The current price movements represent a dramatic reversal from recent months. In May, the ICCO projected a record -494,000 MT global deficit for 2023/24—the largest in over 60 years—after production fell -12.9% year-over-year to 4.368 MMT. The 2023/24 global stocks-to-grindings ratio dropped to a 46-year low of 27.0%. By Friday, the outlook had shifted sufficiently for ICCO to forecast the first global surplus in four years for 2024/25 at 49,000 MT, supported by +7.4% production growth to 4.69 MMT.

The cocoa market remains suspended between competing narratives: tightening inventory dynamics and index inclusion support are pushing prices higher, while persistent demand weakness and steady Ivory Coast shipments provide price resistance. Market participants across trading hubs from New York to London are recalibrating positions in response to the revised supply calculus.