Cocoa Rally Faces Headwinds: Why Ivory Coast Supply Tightness May Be Temporary

Cocoa futures staged a notable recovery today, with ICE NY March contracts (CCH26) climbing 0.98% to add 41 points, while London’s March cocoa #7 (CAH26) surged 2.61% higher by 76 points. This rebound, however, masks a more complex market narrative. The rally stems from reduced shipments flowing to ports in Ivory Coast, which has triggered short-covering activity among traders. Yet beneath this surface recovery lies a fundamental demand crisis and abundant global supplies that may ultimately limit upside potential.

Recent Shipment Declines Spark Futures Rebound

Farmers in Ivory Coast have transported 1.23 million metric tons (MMT) of cocoa to ports since the marketing season opened on October 1, 2025, through February 1, 2026—representing a 4.7% contraction compared to 1.24 MMT during the same window in the prior year. This supply slowdown has temporarily energized the market, lifting prices from their 2.5-year lows reached in recent trading sessions when both New York and London cocoa bottomed simultaneously.

However, this shipment decline must be contextualized within a broader landscape of oversupply. StoneX’s analysis indicates a projected global cocoa surplus of 287,000 MT for the 2025/26 season, declining slightly to 267,000 MT for 2026/27. The International Cocoa Organization (ICCO) further underscores the glut situation: global cocoa inventories expanded 4.2% year-over-year, reaching 1.1 MMT as of their January 23 assessment. These figures suggest that reduced Ivory Coast shipments represent a temporary supply constraint rather than a structural tightening of the global market.

Demand Collapse Overshadows Supply Stories

The fundamental challenge facing cocoa markets remains demand weakness rather than supply shortages. Consumers worldwide have retreated from chocolate purchases amid elevated prices, creating a demand destruction spiral that no supply reduction can easily reverse. Barry Callebaut AG, the world’s largest chocolate producer, recently disclosed a concerning 22% collapse in cocoa division sales volume for the quarter ending November 30, citing weak market demand and a strategic pivot toward higher-margin product segments.

This demand deterioration translates directly into reduced cocoa processing activity. The European Cocoa Association documented an alarming 8.3% year-over-year decline in Q4 cocoa grindings, dropping to 304,470 MT—marking the lowest quarterly figure in 12 years and substantially exceeding the expected 2.9% contraction. Asian grindings similarly contracted, with the Cocoa Association of Asia reporting a 4.8% year-over-year decrease to 197,022 MT in Q4. North America presents a marginally brighter picture, with grindings edging up just 0.3% year-over-year to 103,117 MT, but even this minimal growth reflects stagnation rather than recovery.

Inventory Dynamics and Weather: The Bear Case Persists

The recent recovery in US port inventories further illustrates bearish market dynamics. After touching a 10.5-month low of 1,626,105 bags on December 26, cocoa stocks monitored by ICE have rebounded substantially, climbing to 1,775,219 bags—a 2.5-month high as of last Thursday. This inventory build contradicts the narrative of supply tightness and suggests that reduced Ivory Coast shipments reflect weak demand absorption rather than genuine scarcity.

Weather patterns in West Africa add another bearish layer. Tropical General Investments Group reports that improved growing conditions are positioning Ivory Coast and Ghana for a stronger February-March harvest, with farmers documenting larger and healthier cocoa pods relative to prior-year plants. Mondelez’s recent findings corroborate this optimism: the latest pod count in West Africa stands 7% above the five-year average and significantly elevated compared to last year’s crop.

Ivory Coast Production Surge Versus Contraction Elsewhere

While Ivory Coast supply dynamics warrant close monitoring, Nigeria presents a contrasting supply picture. As the world’s fifth-largest cocoa producer, Nigeria has seen exports decline 7% year-over-year in November to 35,203 MT. More significantly, the Cocoa Association of Nigeria has forecast a 11% production contraction for 2025/26, projecting output at 305,000 MT versus an estimated 344,000 MT in the prior season. This decline offers modest price support, but it remains insufficient to offset abundant supplies from Ivory Coast and other major producing regions.

Global Supply Outlook: Revisiting the Surplus Picture

The trajectory of global cocoa supply has undergone substantial recalibration. The ICCO reduced its 2024/25 global surplus estimate to a mere 49,000 MT on November 28, down sharply from a prior projection of 142,000 MT. Simultaneously, the organization lowered its 2024/25 production estimate to 4.69 MMT from 4.84 MMT, reflecting a more pessimistic output view. Yet Rabobank’s latest assessment, released last Tuesday, revised the 2025/26 surplus estimate downward to 250,000 MT from a November projection of 328,000 MT—confirming that surplus conditions, while moderating, remain the dominant market structure.

Historical context adds perspective: the ICCO’s May 30 update marked 2023/24 as featuring a deficit of -494,000 MT, the largest shortfall in over six decades as production fell 12.9% year-over-year to 4.368 MMT. By 2024/25, the organization expects the first surplus in four years, with global production rising 7.4% year-over-year to 4.69 MMT. This recovery in production, coupled with persistent demand weakness, suggests that today’s price rally may represent a temporary trading opportunity rather than the beginning of a sustained uptrend. Ivory Coast’s reduced shipments offer tactical support, but fundamental forces—demand malaise and structural oversupply—remain the primary drivers of the cocoa market’s medium-term direction.