Global Cocoa Supply Tightens, Cocoa Price Surge Accelerates to 1-Month Highs

Sharp Rally Driven by Supply Crunch

Cocoa futures markets are experiencing a powerful upswing as global supply indicators deteriorate. March ICE NY cocoa futures climbed +348 points (+5.92%), while March ICE London cocoa #7 advanced +247 points (+5.81%), both marking 1-month peak levels. The rally intensifies a two-week bullish momentum driven by increasingly constrained supply conditions worldwide.

Supply Forecasts Revised Downward

The International Cocoa Organization (ICCO) significantly downgraded its outlook on November 28, slashing the 2024/25 global surplus estimate to just 49,000 MT—a dramatic reduction from the prior 142,000 MT projection. Simultaneously, ICCO lowered total global cocoa production forecasts to 4.69 MMT from 4.84 MMT. This marks the first surplus in four years, following a devastating 494,000 MT deficit in 2023/24, the largest shortfall in over six decades. Rabobank added to bearish sentiment on Tuesday, cutting its 2025/26 surplus projection to 250,000 MT from 328,000 MT.

Physical Market Tightness Supports Rally

Inventory levels at monitored US ports have compressed to an 8.75-month low, with only 1,672,131 bags on hand. Arrivals in Ivory Coast ports have also softened notably—the world’s top cocoa producer shipped just 804,288 MT this marketing year (October 1-December 7), a 1.8% decline from 819,425 MT in the prior year period. These physical market dynamics reinforce price strength.

Index Inclusion Creates New Demand Catalyst

Beginning in January, NY cocoa futures will be added to the Bloomberg Commodity Index (BCOM), potentially unleashing significant passive fund flows. Citigroup estimates this inclusion could trigger as much as $2 billion of buying activity in the first week of January alone, providing additional price support.

Production Risks from Africa’s Top Grower

Nigeria, ranked fifth globally in cocoa output, faces a production headwind. The nation’s Cocoa Association projects 2025/26 production will decline 11% year-over-year to 305,000 MT from an expected 344,000 MT in 2024/25. September exports remained flat year-over-year at 14,511 MT, offering little relief.

Weather Mixed as Counterbalancing Factor

Offsetting the supply concerns, West African weather conditions have become favorable for crop development. Farmers in Ivory Coast report the combination of rain and sunshine is promoting tree bloom, while Ghana’s regular precipitation is supporting pod development ahead of the harmattan season. Chocolate manufacturer Mondelez noted that current cocoa pod counts in West Africa stand 7% above the five-year average and materially exceed last year’s harvest levels.

Demand Weakness Persists Despite Supply Pressures

Chocolate consumption indicators paint a softer picture. Hershey’s CEO cited “disappointing” Halloween chocolate sales, a concerning signal given that Halloween accounts for nearly 18% of annual US candy sales. Regional cocoa grinding data confirms this sluggishness: Q3 Asian cocoa grindings plunged 17% year-over-year to 183,413 MT (the slowest Q3 in nine years), while European grindings fell 4.8% to 337,353 MT (the lowest third quarter in a decade). North American chocolate candy sales volumes contracted more than 21% over the 13-week period ending September 7.

Policy Tailwinds Alleviate Supply Pressure

The European Parliament’s November 26 decision to delay deforestation regulations by one year provides temporary relief to supply concerns. The EUDR framework, designed to combat deforestation for commodities including cocoa, has been postponed, allowing continued imports from regions experiencing forest loss. Additionally, the Trump administration’s November 14 announcement eliminating the proposed 10% reciprocal tariff on non-US commodities (including cocoa) and the 40% tariff on Brazilian food imports removes another headwind for the market.

Market Outlook

The cocoa price structure reflects a complex interplay between supply tightness, weak demand dynamics, and structural tailwinds from index inclusion. While favorable African weather could eventually boost yields, the near-term supply deficit and incoming passive flows appear positioned to sustain upside momentum for cocoa prices.