Cocoa Rebounds on Production Concerns While Global Markets Grapple with Oversupply

Cocoa futures staged a moderate recovery on Monday, with New York contracts climbing 45 points (+1.08%) and London futures gaining 84 points (+2.88%). The uptick came amid signs that shipments to West African ports are slowing—a development that prompted traders to close short positions and reassess their bearish stance. Despite this tactical bounce, cocoa faces persistent headwinds from ample global supplies and tepid consumer demand that continue to pressure prices across multiple trading centers.

Data from Ivory Coast revealed that farmers shipped 1.23 million metric tons (MMT) to ports during the current marketing year through early February, marking a 4.7% decline compared to 1.24 MMT in the prior year period. As the world’s dominant cocoa producer, developments in the Ivory Coast significantly influence global price dynamics. Just last week, New York cocoa had touched a 2.25-year low while London contracts sank to a 2.5-year trough, highlighting the intense selling pressure that has defined recent months.

Supply Constraints Provide Mild Support to Cocoa Markets

While Ivory Coast deliveries are decelerating, projections for global cocoa production paint a more complex picture. StoneX forecasts a surplus of 287,000 MT for the current 2025/26 season, suggesting that even with moderated shipments, supplies remain ample. The International Cocoa Organization (ICCO) reported that global cocoa stocks have risen 4.2% year-over-year to 1.1 MMT, reinforcing concerns about overcapacity in the global market. However, production setbacks in other regions provide some offsetting support—Nigeria’s November cocoa exports contracted 7% year-over-year to 35,203 MT, and the country’s association projects a 11% production decline for the 2025/26 crop year compared to prior estimates. For a commodity so deeply tied to economic cycles, smaller supplies from secondary producers can offer psychological support even when global balances remain loose.

ICCO’s recent revisions underscore how dramatically cocoa market dynamics have shifted. The organization cut its 2024/25 surplus estimate to just 49,000 MT in December—a dramatic reduction from a November forecast of 142,000 MT and marking the first surplus in four years after a massive deficit period. Earlier estimates had positioned 2023/24 as bearing a -494,000 MT deficit, the largest shortfall in over 60 years.

Demand Weakness Keeps Cocoa Under Pressure

The fundamental challenge for cocoa prices lies not in production but in consumption. Barry Callebaut AG, which operates as the world’s largest bulk chocolate supplier, disclosed a 22% sales volume decline in its cocoa division for the quarter ending November 30. The company cited “negative market demand and a strategic shift toward higher-margin segments,” signaling that even major industrial buyers are scaling back cocoa purchases amid the high cost environment.

Grinding data—a key demand indicator—reveals broad-based softness across regions. European cocoa grindings fell 8.3% year-over-year in the final quarter to 304,470 MT, worse than the expected 2.9% decline and marking the weakest fourth quarter in 12 years. Asian grindings contracted 4.8% year-over-year to 197,022 MT, while North American mills showed minimal growth at just +0.3% year-over-year to 103,117 MT. Consumers worldwide continue to resist elevated chocolate prices, creating a vicious cycle where demand destruction feeds back into production decisions.

Inventories Rebuild While Weather Prospects Remain Supportive

The US inventory picture has begun shifting after bottoming in late December. ICE-monitored stocks held at American ports rebounded to 1.775 million bags last Thursday, up from a 10.5-month low of 1.626 million bags on December 26. While this inventory accumulation historically weighs on prices, it also reflects the reality that cocoa is not experiencing acute scarcity—a factor that tempers any price rally.

On a more supportive note, growing conditions across West Africa have improved notably. Tropical General Investments Group highlighted that favorable weather in the Ivory Coast and Ghana is expected to enhance the February-March harvest period, with farmers reporting larger and healthier pods relative to last year. Mondelez disclosed that current cocoa pod counts in the region sit 7% above the five-year average and are “materially higher” than the prior year’s crop. The Ivory Coast’s main harvest is now underway, with farmers expressing optimism about crop quality. Such favorable agricultural conditions paradoxically pressure prices by increasing supply expectations, even as they support regional farming economies.

Cocoa’s Complex Price Picture

The cocoa market reflects a fundamental mismatch between structural oversupply and occasional supply tightness. Monday’s modest recovery highlighted how quickly sentiment can shift when unexpected supply developments surface, yet the underlying environment remains one of abundance. With global surpluses expected to persist through 2026/27 on Rabobank estimates of 250,000 MT, and with demand continuing to lag from a combination of high prices and consumer preference shifts, cocoa faces a challenging outlook. The near-term recovery provides a window for risk management, but the longer-term picture remains pressured by the fundamental imbalance between what the world produces and what consumers are willing to purchase at current price levels.