Cocoa Prices on the Rise Amid Global Supply Changes

Today, March Ice New York Cocoa (CCH26) surged by +128 (+2.18%), while March Ice London Cocoa #7 (CAH26) climbed +130 (+3.07%).

The rise in cocoa prices is notable, largely due to indications that the global cocoa surplus is shrinking. Investors are covering their shorts in cocoa futures, nudging prices upward after Citigroup revised its 2025/26 global cocoa surplus forecast down to 79,000 tonnes, a significant cut from the 134,000 tonnes projected last September.

Falling ICE cocoa stocks are contributing to this upward trend. As of Monday, the inventory of cocoa under ICE observation at U.S. ports dropped to 1,655,457 bags, marking a nine-month low.

Moreover, cocoa futures are gaining traction, especially with New York cocoa set to be included in the Bloomberg Commodity Index (BCOM) starting in January. This inclusion could prompt considerable buying from passive commodity funds that track the index. Citigroup estimates that this could lead to about $2 billion in purchases of New York cocoa futures in the first week of January.

However, as more cocoa reaches Ivorian ports, there’s a counterbalance to price increases. Data shows Ivorian farmers have shipped 895,544 tonnes of cocoa to ports from October 1 to December 14 this marketing year. This is a modest increase of +0.2% from last year’s 894,009 tonnes during the same timeframe. As the largest cocoa producer globally, Ivory Coast’s harvest data is influential.

Cocoa prices recently saw a sharp rebound, reaching a five-week peak last Thursday amid tightening global supply forecasts. The International Cocoa Organization (ICCO) has revised its global cocoa surplus outlook for 2024/25 down to 49,000 tonnes, a significant drop from the previous 142,000 tonnes. Additionally, global cocoa production has been adjusted down from 4.84 MMT to 4.69 MMT for 2024/25. Rabobank also trimmed its forecast for the 2025/26 global cocoa surplus from 328,000 tonnes to 250,000 tonnes.

Still, the anticipation of a bumper cocoa crop in West Africa is having a dampening effect on prices. On November 19, cocoa prices plummeted to their lowest in 1.75 years, driven by optimism over a successful cocoa season. Farmers in Ivory Coast are reporting that their cocoa trees are thriving, thanks in part to favorable weather conditions. Meanwhile, in Ghana, farmers noted that their cocoa beans are maturing more quickly due to the same good weather.

Chocolate company Mondelez has indicated that the latest cocoa crop from West Africa is 7% above the five-year average and is significantly better than last year’s harvest. With the main harvesting season just starting in Ivory Coast, there’s a hopeful atmosphere surrounding the quality of this year’s yield.

On November 26, the European Parliament extended laws aimed at combating deforestation, which has put downward pressure on cocoa prices while ensuring a steady supply. The EU regulation, known as EUDR, is focused on addressing deforestation in countries exporting key commodities, including cocoa. The delay in implementing this regulation means imports from deforested areas in Africa, Indonesia, and South America can continue for now.

However, the ongoing weakness in global cocoa demand is concerning. The CEO of Hershey recently expressed disappointment over this year’s Halloween chocolate sales, which traditionally account for nearly 18% of annual U.S. candy sales. Furthermore, the Asia Cocoa Association reported a 17% drop in cacao crushing volume in Q3, marking the lowest level in nine years. Similarly, the European Cocoa Association noted a -4.8% year-on-year decrease in cocoa crushing in the same quarter, the lowest in a decade. While North American cocoa milling saw a slight increase of +3.2%, this was somewhat skewed by new reporting methods. Alarmingly, North American chocolate sales fell over -21% compared to last year, according to Circana data.

On a positive note, the decline in cocoa production in Nigeria, the fifth largest cocoa producer, might provide some support for cocoa prices. The Cocoa Association of Nigeria anticipates production to fall to 305,000 tonnes for 2025/26, down from the previously estimated 344,000 tonnes for 2024/25. Interestingly, Nigeria’s cocoa exports remained flat year-on-year at 14,511 tonnes in September.

Looking ahead, the ICCO revised its global cocoa deficit for 2023/24 to -494,000 tonnes, the worst deficit seen in over 60 years. They’ve reported a significant drop in cocoa production for this year, suggesting a reduction of -12.9% to 4.368 MMT. Current forecasts indicate a potential cocoa surplus of 49,000 tonnes for 2024/25, the first expected surplus in four years, with a projected production increase to 4.69 MMT.