Just been looking at cocoa markets and the selloff is pretty brutal right now. March contracts are down over 6% in both New York and London this week, marking the third straight week of losses. NY cocoa hit its lowest point in two years while London just touched a 2.25-year low. Pretty wild considering where we were a few months back.

The story here is pretty straightforward - demand has basically dried up. Barry Callebaut reported a 22% drop in cocoa sales last quarter because chocolate is just too expensive right now. Consumers are pulling back hard. Meanwhile, global cocoa inventories jumped 4.2% year-over-year to 1.1 million metric tons according to ICCO, so supply is still sitting heavy on the market.

Europe's cocoa grindings fell 8.3% in Q4, which was way worse than expected. Asia also saw a 4.8% drop. The only bright spot was North America with a tiny 0.3% bump. But here's the thing - West Africa's weather has been favorable, so we're looking at a solid harvest coming through February and March. Ivory Coast and Ghana both have pod counts running above average, which means more cocoa flooding the market soon.

Now the interesting part: there are some tightening signals underneath all this. Ivory Coast actually shipped 3.3% less cocoa this season compared to last year, and Nigeria's output is falling too. Nigeria's cocoa price dynamics have been under pressure with November exports down 7% year-over-year, and the Nigerian Cocoa Association is forecasting a 11% production decline for next season. That's significant when you think about Nigeria's role in the global supply.

ICCO also revised their surplus estimate down to 49,000 metric tons from 142,000 metric tons previously, which suggests they're getting more cautious about supply. But with inventory levels still elevated and demand staying weak, I don't see prices bouncing back anytime soon. The EU delayed their deforestation law too, so African supplies should keep flowing. Watching this space closely.