Barchart Analysis: Cocoa Market Faces Headwinds from Surplus Supply and Fading Demand

The global cocoa market has entered a pronounced downward cycle, with contract prices sinking to multi-year lows as fundamental pressures intensify on both sides of the supply-demand equation. May ICE NY cocoa contracts hit fresh contract lows, while March ICE London cocoa posted its lowest levels in nearly three years. This sustained seven-week decline reflects a deeper structural challenge: robust global supplies are colliding with weakening consumption patterns, creating an environment of sustained downward pressure on prices.

Cocoa Supply Glut Intensifies Amid Strong Harvests

The foundation of cocoa’s price weakness lies in a significant supply-demand imbalance. According to StoneX forecasts, the global cocoa market is bracing for substantial surpluses in coming seasons—287,000 metric tons anticipated for 2025/26 and 267,000 MT for 2026/27. The International Cocoa Organization (ICCO) added to these concerns when it reported in late January that global cocoa stocks surged 4.2% year-over-year to 1.1 million metric tons, signaling ample inventory levels.

ICE cocoa warehouse inventories have expanded significantly, reaching a 5.75-month peak of over 2.15 million bags. This accumulation reflects a paradox: while suppliers continue shipping beans, international buyers remain reluctant to commit to purchases at the official farm-gate prices set by Ivory Coast and Ghana. Both regions, which together produce more than half of the world’s cocoa, attempted to defend prices by slashing official purchasing rates—Ghana cut prices by nearly 30% for the upcoming 2025/26 season, while Ivory Coast considered a 35% reduction ahead of its mid-crop harvest beginning in April.

Favorable growing conditions across West Africa have further amplified supply concerns. Recent reports indicate that farmers in the Ivory Coast and Ghana are managing larger and healthier cocoa pods compared to the same period in the previous year. The Ivory Coast’s mid-crop, which typically represents about 25% of annual production and is forecast at 400,000 to 450,000 MT, is expected to benefit from these improved conditions. Additionally, Nigerian cocoa exports—from the world’s fifth-largest producer—surged 17% year-over-year to 54,799 MT in December, adding another layer of supply pressure to the market.

Buyer Resistance Keeps Cocoa Prices Under Pressure

On the demand side, the picture has turned equally bleak. High chocolate prices have driven consumers away from cocoa products, dampening end-market enthusiasm. Barry Callebaut AG, the world’s largest producer of bulk chocolate, reported a striking 22% decline in sales volume within its cocoa division for the quarter ending in November, directly attributing the drop to “negative market demand and a shift toward higher-margin product segments.”

The weakness extends across major cocoa processing regions. European cocoa grindings fell 8.3% year-over-year in the fourth quarter to 304,470 MT—a sharper decline than the anticipated 2.9% drop and marking the lowest fourth-quarter volume in 12 years. Asian cocoa grindings also softened, declining 4.8% year-over-year to 197,022 MT, while North American grindings rose only marginally by 0.3% year-over-year to 103,117 MT. These grinding reports, which serve as forward indicators of demand, paint a picture of constrained consumption as high prices continue to weigh on buyer behavior.

Independent market observers have reinforced this demand narrative. Chocolate manufacturer Mondelez reported that the latest cocoa pod count in West Africa sits 7% above the five-year average and materially higher than last year’s harvest, suggesting ample supply will persist as farmers move into peak harvest season for the main crop in the Ivory Coast.

African Production Forecasts Add to Cocoa Market Headwinds

A nuanced view emerges when examining medium-term production projections. The Ivory Coast has guided for a 10.8% year-over-year decline in cocoa production to 1.65 million MT for 2025/26 from 1.85 MMT in 2024/25, which could provide some support. Similarly, Nigeria’s Cocoa Association projects a 11% year-over-year production decline to 305,000 MT in 2025/26 from the prior 344,000 MT—suggesting that while near-term supplies remain ample, future constraints may eventually tighten the market.

Yet current physical realities continue to weigh more heavily than future prospects. Cumulative cocoa deliveries to Ivory Coast ports through late February reached 1.31 million MT for the current marketing year (October 1, 2025 through February 22, 2026), down 3.7% from 1.36 MMT during the equivalent prior-year period. While slower shipment flows could eventually support prices, the recent pace is still substantial relative to the weak demand environment.

What Market Watchers Are Watching: Cocoa’s Risk Factors Ahead

The ICCO’s December estimate highlighted the market’s turning point: a 49,000 MT global surplus for 2024/25 marked the first surplus in four years, ending a multi-year deficit period. Global cocoa production jumped 7.4% year-over-year to 4.69 million MT, reflecting bumper harvests in key regions. Rabobank’s February revision of its 2025/26 surplus estimate—cut to 250,000 MT from a prior November forecast of 328,000 MT—signals that market participants are gradually pricing in some production normalization, yet surpluses remain substantial by historical standards.

The cocoa market’s trajectory will depend on whether weakening consumption eventually depletes the current supply overhang or whether fresh supply waves from African harvests continue to accumulate. Until buyer demand strengthens materially or near-term production plans are revised downward, pressure is likely to persist across cocoa contracts. Investors tracking this commodity through various market platforms continue monitoring warehouse data, grinding reports, and official production guidance as critical signals for the next phase of this structural rebalancing.