Cocoa Market Stabilizes Amid Supply Tightness from West Africa's Top Producer

Cocoa futures exhibited mixed performance today with signs of market stabilization. New York cocoa for March delivery (CCH26) gained 43 points, rising 0.83%, while December London cocoa #7 (CAZ25) slipped 78 points to decline 2.06%. The price rebound marks a recovery from the lowest levels seen in 1.75 years, driven by renewed short-covering activity in response to emerging supply constraints from the world’s leading cocoa producer.

Supply-Side Tightening Supports Price Recovery

Recent government data from the Ivory Coast—which dominates global cocoa production—revealed a notable contraction in cocoa arrivals. Farmers shipped 618,899 MT of cocoa to ports during the current marketing year (October 1 through November 23), representing a 3.7% year-over-year decline compared to 642,500 MT in the equivalent period last year. This reduced supply flow has provided immediate support to futures markets.

The recent price correction that brought cocoa to 1.75-year lows stemmed partially from last Wednesday’s announcement by European Union nations proposing a one-year delay to the EU’s Deforestation Regulation (EUDR). While the postponement eases near-term supply concerns and permits continued agricultural imports from deforestation-prone regions, it had initially weighed on sentiment amid changing regulatory expectations.

Demand Weakness Remains the Primary Headwind

Despite supply tightening, demand-side challenges continue to pressure cocoa valuations. Chocolate manufacturer Hershey reported disappointing Halloween sales, a season that typically comprises nearly 18% of annual US candy purchases, second only to Christmas. Global grinding activity has also contracted significantly: Asia’s Q3 cocoa grindings fell 17% year-over-year to 183,413 MT, marking the smallest Q3 volume in nine years. European Q3 grindings declined 4.8% to 337,353 MT, reaching a 10-year low for the third quarter. North American chocolate sales volume dropped more than 21% in the 13-week period ending September 7 compared to year-ago levels.

Production Outlook: Near-term Abundance, Structural Decline

West African production prospects remain robust. Favorable weather conditions and optimal pod development have led chocolate makers to report that current cocoa pod counts in the region run 7% above the five-year average and materially exceed last year’s harvest levels. However, structural headwinds loom elsewhere. Nigeria, the world’s fifth-largest cocoa producer, faces a projected 11% production decline to 305,000 MT in the 2025/26 cycle from 344,000 MT estimated for 2024/25.

Additional bearish factors include the Trump administration’s November 14 announcement eliminating proposed 10% reciprocal tariffs on non-domestic commodities, including cocoa, which removed a potential price support mechanism.

Inventory Dynamics and Historical Context

Supportive factors exist on the inventory side. ICE-monitored cocoa stocks held at US ports recently fell to an 8.25-month low of 1,733,345 bags, tightening near-term supply dynamics. Historical data from the International Cocoa Organization underscores the volatility in cocoa markets: the 2023/24 global cocoa deficit reached 494,000 MT—the largest shortfall in over 60 years—with production falling 13.1% to 4.380 million metric tons. For the current 2024/25 season, ICCO projects a global surplus of 142,000 MT, the first in four years, with production rising 7.8% to 4.84 million metric tons.