Multiple Forces Hammer Cocoa Prices as Supply Surges and Demand Falters

Recent weeks have seen cocoa markets face intense downward pressure as a confluence of negative factors converge on prices. March contracts across major exchanges declined sharply, with New York ICE cocoa falling 6.38% and London ICE cocoa dropping 6.72%, pushing prices to multi-year lows. The fundamental drivers behind this price deterioration reveal a market caught between abundant inventories and weakening consumption—a toxic combination that continues to hammer cocoa valuations.

Demand Collapse Signals Market Distress

The consumption side of the equation presents a troubling picture for cocoa producers. Major chocolate manufacturers have begun reporting significant order reductions, signaling that consumers remain reluctant to purchase at current price levels despite market declines. Barry Callebaut AG, the world’s largest bulk chocolate maker, disclosed a particularly concerning -22% drop in sales volume within its cocoa division during the quarter ending November 30. The company attributed this decline to “negative market demand and a prioritization of volume toward higher-return segments within cocoa,” highlighting how elevated pricing has fundamentally altered purchasing behavior across the industry.

Grinding activity data reinforces this demand weakness narrative. European cocoa processors reported a Q4 decline of -8.3% year-over-year, falling to 304,470 metric tons—marking the lowest quarterly performance in 12 years and significantly exceeding analyst expectations of only -2.9% contraction. Asian cocoa grindings demonstrated similar softness with a -4.8% year-over-year decline to 197,022 MT, while North American grinding activity managed only marginal growth of +0.3%, rising to 103,117 MT. These figures collectively demonstrate that tepid demand pervades all major consumption regions globally.

Oversupply Pressures Persist Amid Record Production

On the supply side, the situation mirrors the demand weakness, creating a perfect storm for price pressure. The International Cocoa Organization (ICCO) reported that global cocoa stocks expanded by 4.2% year-over-year to reach 1.1 million metric tons in 2024/25, reflecting production levels that continue to exceed consumption. Production data underscores this surplus dynamic: global cocoa output surged to 4.69 million metric tons in 2024/25, representing a +7.4% year-over-year increase and marking the first surplus after four consecutive years of deficits.

This production expansion stands in sharp contrast to the severely constrained market that preceded it. ICCO estimates that 2023/24 generated a record deficit of -494,000 MT—the largest in over 60 years—driven by production that plummeted -12.9% to 4.368 million metric tons. The 2024/25 rebound to surplus territory, though initially modest at 49,000 MT, represents a fundamental market regime change that has shifted sentiment dramatically.

Inventory Dynamics and Favorable Growing Conditions Add Downside Pressure

West African growing conditions have recently shifted to favorable territory, introducing fresh supply pressure. Tropical General Investments Group noted that optimal weather patterns in West Africa are expected to support robust harvests during the February-March season in major producing regions. Mondelez reported that the latest cocoa pod count in West Africa stands 7% above the five-year average and materially higher than the prior year’s harvest, suggesting that supply growth will persist through the current season.

However, cocoa inventories present a complex picture. After declining to a 10.5-month low of 1,626,105 bags on December 26, US port-held cocoa inventories—monitored by ICE—subsequently rebounded to 1,773,618 bags, representing a 2.5-month high. This inventory recovery, typically viewed as a bearish signal, reflects the supply-demand imbalance crystallizing into observable market structure.

On a more supportive note, Ivory Coast farmers—representing the world’s largest cocoa producer—have adopted a supply-withholding strategy in response to depressed prices. Cumulative export data through early 2026 showed that farmers shipped 1.20 million metric tons to ports, down -3.2% from 1.24 million metric tons in the equivalent period a year earlier. This reduction reflects rational producer behavior as low prices have incentivized storage rather than immediate sale. Conversely, Nigeria, the world’s fifth-largest cocoa producer, faces structural tightening. Nigeria’s November cocoa exports fell -7% year-over-year to 35,203 MT, while the Cocoa Association of Nigeria projects that 2025/26 production will contract -11% year-over-year to 305,000 MT from a projected 344,000 MT in the prior season.

Supply Outlook Shift Offers Limited Support

The medium-term supply trajectory provides some price support, though gains remain constrained. ICCO substantially reduced its 2024/25 global cocoa surplus estimate to 49,000 MT (down from 142,000 MT) and simultaneously lowered its production forecast to 4.69 million metric tons from 4.84 million metric tons. Rabobank similarly trimmed its 2025/26 surplus projection to 250,000 MT from a prior November forecast of 328,000 MT, reflecting recognition that demand destruction and supply reactions will gradually rebalance markets.

These adjustments signal that structural support may eventually emerge as producers respond to depressed economics by reducing plantings and curtailing investments in maintenance. Yet with current supplies still abundant relative to depressed demand, near-term pressure on cocoa prices appears likely to persist until consumption patterns recover or supply growth moderates further.