Cocoa News: Market Rally Amid Tightening Supply and Weakening Demand

Recent cocoa futures contracts posted solid gains, with March ICE New York cocoa climbing by 90 points to a 2.14% gain on Tuesday, while March ICE London cocoa surged 91 points, representing a 3.04% increase. The price recovery marks the second consecutive session of strength as traders reassess the balance between available supplies and actual consumption needs.

Supply Chain Tightening Prompts Market Reaction

The primary catalyst behind the price bounce stems from slowing cocoa deliveries to ports in the Ivory Coast, the world’s leading cocoa producer. According to Monday’s cumulative figures, Ivory Coast farmers transported just 1.23 million metric tons (MMT) of cocoa to ports during the current marketing year (October 1, 2025, through February 1, 2026), marking a 4.7% decline compared to 1.24 MMT in the identical period last year. This reduced flow has triggered short-covering activity among futures traders betting on further price declines.

Regional production challenges are also reshaping supply expectations. Nigeria, ranked as the world’s fifth-largest cocoa producer, shipped just 35,203 MT of cocoa in November, a 7% year-over-year drop. Looking ahead, Nigeria’s Cocoa Association projects that the nation’s 2025/26 cocoa output will contract by 11% compared to the previous crop year, falling to 305,000 MT from an estimated 344,000 MT. These supply-side constraints have provided some floor for market prices despite other bearish factors.

Chocolate Consumption Remains a Headwind

Despite the supply tightening, demand for cocoa continues to struggle. Barry Callebaut AG, the world’s largest bulk chocolate manufacturer, disclosed a striking 22% decline in sales volume within its cocoa division during the quarter ending November 30. The company attributed the weakness to “negative market demand and a prioritization of volume toward higher-return segments within cocoa.”

This demand deterioration extends across major grinding centers worldwide. The European Cocoa Association reported that fourth-quarter European cocoa grindings fell 8.3% year-over-year to 304,470 MT—well below market expectations of a 2.9% decline and marking the lowest fourth-quarter result in 12 years. Asian cocoa grindings similarly underperformed, with the Cocoa Association of Asia documenting a 4.8% year-over-year drop to 197,022 MT in the final quarter. North American grinding activity showed minimal growth, increasing just 0.3% year-over-year to 103,117 MT. This broad-based weakness reflects consumers’ continued reluctance to absorb elevated chocolate prices.

Inventory Buildup and Mixed Market Signals

Complicating the price picture, ICE-monitored cocoa inventories held at U.S. ports have rebounded sharply since hitting a 10.5-month low of 1,626,105 bags on December 26. By Tuesday, stocks climbed to a 2.5-month high of 1,782,921 bags—a development that typically weighs on futures prices by signaling ample supplies available for immediate use.

Meanwhile, global cocoa stocks have expanded notably. The International Cocoa Organization (ICCO) reported on January 23 that worldwide cocoa stocks rose 4.2% year-over-year to 1.1 MMT. These elevated inventory levels, combined with near-record global supplies, have sustained downward pressure on valuations, with both New York and London cocoa contracts recently posting multi-year lows.

Harvest Optimism Versus Structural Oversupply

Agricultural conditions in West Africa present an intriguing counterpoint to the bearish inventory backdrop. Tropical General Investments Group highlighted that favorable growing conditions are expected to support an uptick in the February-March cocoa harvest across the Ivory Coast and Ghana, with farmers reporting notably larger and healthier pods compared to the prior year. Chocolate maker Mondelez similarly noted that the latest cocoa pod count in West Africa stands 7% above the five-year average, a “materially higher” level than last year’s harvest.

The Ivory Coast’s primary crop harvest has commenced, and grower sentiment regarding crop quality remains constructive. Yet these favorable production prospects underscore a fundamental market reality: cocoa supplies remain abundant relative to current demand.

Market Surplus Expectations Persist

Independent forecasters continue to anticipate structural oversupply conditions. StoneX projected a global cocoa surplus of 287,000 MT for the 2025/26 season, with a further 267,000 MT surplus anticipated for 2026/27. Rabobank recently trimmed its 2025/26 global surplus estimate to 250,000 MT from its prior November projection of 328,000 MT, yet still expects surpluses to persist.

This outlook represents a marked improvement from the severe deficits experienced in prior years. ICCO previously revised its 2023/24 global cocoa deficit to minus 494,000 MT, the largest shortage in over 60 years. However, ICCO estimated a 49,000 MT surplus for 2024/25—the first surplus in four years—as global production rebounded 7.4% year-over-year to 4.69 MMT. These cyclical swings in supply-demand balance continue to define cocoa markets and shape trader positioning in cocoa futures contracts.