Cocoa Prices Stage Recovery as West African Export Restraint Tightens Supply

Cocoa prices have staged a notable recovery in recent trading, with March contracts on ICE New York climbing +134 points (+3.19%) and London’s March contract rising +73 points (+2.43%). This reversal follows a significant two-week selloff that had driven nearby futures to multi-year lows—New York cocoa fell to a 2-year low while London touched a 2.25-year nadir before the recovery took hold.

The upswing reflects a confluence of factors reshaping near-term supply dynamics. A weaker US dollar has provided tailwinds for commodities priced in dollars, while more importantly, West African producers—accounting for the bulk of global cocoa output—have begun withholding shipments in response to depressed prices. Ivory Coast, the world’s largest cocoa-producing nation, shipped just 1.20 million metric tons (MMT) to ports during the current marketing year through January 25, representing a 3.2% year-over-year decline compared to 1.24 MMT in the prior-year period.

Supply Constraints Begin to Offset Structural Oversupply

Despite the recent supply restriction efforts, structural headwinds persist. The International Cocoa Organization (ICCO) reported that global cocoa stocks surged 4.2% year-over-year to 1.1 MMT, providing ample inventory buffers that have weighed on cocoa prices throughout the selloff. This inventory cushion has been bolstered by favorable growing conditions across West Africa, where healthier pods and higher pod counts—running 7% above the five-year average according to chocolate makers monitoring the harvest—suggest another robust crop is underway in both Ivory Coast and Ghana.

However, supply tightness is emerging in other regions. Nigeria, the world’s fifth-largest cocoa producer, saw November exports plummet 7% year-over-year to just 35,203 metric tons (MT). More concerning for the market’s longer-term balance, Nigeria’s Cocoa Association has projected that 2025/26 production will decline 11% year-over-year to 305,000 MT from the prior year’s 344,000 MT. This contraction introduces a structural constraint on global supply, even as West African near-term supplies remain elevated.

Demand Weakness Continues to Constrain Cocoa Price Recovery Potential

The rebound in cocoa prices has occurred against a backdrop of persistent demand deterioration. Consumers continue to resist elevated chocolate prices, with Barry Callebaut AG—the world’s largest bulk chocolate supplier—reporting a stark 22% volume decline in its cocoa division for the quarter ending November 30. The company attributed the decline to “negative market demand and a strategic pivot toward higher-margin product segments.”

Cocoa grinding data reinforces demand concerns across major consuming regions. European cocoa grindings in Q4 fell 8.3% year-over-year to 304,470 MT, significantly worse than the expected 2.9% decline and marking the weakest Q4 performance in 12 years. Asian cocoa grindings similarly contracted 4.8% year-over-year to 197,022 MT in the same quarter. North American grindings proved marginally more resilient, rising just 0.3% year-over-year to 103,117 MT—a near-flat performance that underscores global demand softness.

Inventory Dynamics and Production Outlook Frame Price Boundaries

Recent inventory movements have added volatility to price dynamics. After touching a 10.25-month low of 1,626,105 bags on December 26, US-held cocoa inventories tracked by ICE have rebounded to a 2-month high of 1,752,451 bags, a bearish signal that limits cocoa price upside. This recovery in stockpiles reflects the structural supply surplus that has dominated the market narrative.

Looking at the production and balance sheet outlook, the ICCO has significantly revised its assessments. In November, the organization slashed its 2024/25 global cocoa surplus estimate to just 49,000 MT from 142,000 MT previously, while lowering overall production to 4.69 MMT from 4.84 MMT. This reduction marks a sharp contraction in the surplus, the first decline in four years—a shift that could provide support for cocoa prices if demand stabilizes.

Rabobank has taken an even more cautious view, cutting its 2025/26 global cocoa surplus forecast to 250,000 MT from 328,000 MT in its November projection. The broader historical context reinforces the market’s structural tightness: in mid-2024, the ICCO had revised the 2023/24 global cocoa balance to show a deficit of 494,000 MT—the largest deficit in over 60 years. With 2024/25 now projected to return to a modest surplus of 49,000 MT following a 7.4% year-over-year production rebound to 4.69 MMT, the market is transitioning from severe supply deficit to fragile equilibrium, positioning cocoa prices at an inflection point where supply management and demand recovery will determine the trajectory ahead.