Cocoa Supply Crunch Sends Investing Cocoa Futures Soaring to Multi-Week Peaks

Cocoa futures markets are experiencing a significant rally, with March ICE New York cocoa (CCH26) climbing +295 points to achieve a +4.96% gain, while March ICE London cocoa (CAH26) has surged +275 points representing a +6.52% jump. These moves have pushed cocoa to its strongest levels in two weeks, marking a notable shift in market sentiment.

Port Arrivals Decline Fuels Supply Anxiety

The primary catalyst behind this surge stems from deteriorating cocoa delivery flows at Ivory Coast ports. During the week ending December 28, Ivorian farmers brought 59,708 MT of cocoa to ports—a steep -27% contraction versus the equivalent week in the prior year. The year-to-date marketing period (October 1 through December 28) shows cumulative shipments of 1.029 MMT, representing a -2.0% decline from the 1.050 MMT recorded during the same window last year. As the globe’s preeminent cocoa supplier, any disruption in Ivory Coast logistics carries outsized weight for global chocolate producers and investors analyzing cocoa market dynamics.

Index Inclusion and Inventory Support

Underlying strength in cocoa prices reflects multiple supportive factors. Most notably, cocoa futures are gaining traction ahead of their anticipated inclusion in the Bloomberg Commodity Index (BCOM) starting in January. Citigroup’s research suggests this institutional addition could channel as much as $2 billion of inflows into New York cocoa contracts. Additionally, monitored warehouse inventories at US ports have compressed to a 9.5-month nadir of 1,626,105 bags as of last Friday, creating a structural floor beneath prices.

Production Outlook Deteriorates Globally

The International Cocoa Organization (ICCO) has materially downgraded its production forecasts. On November 28, ICCO slashed its 2024/25 surplus projection to just 49,000 MT from a prior estimate of 142,000 MT, while simultaneously reducing global production expectations to 4.69 MMT from the previously forecast 4.84 MMT. This represents a dramatic tightening of the supply-demand equilibrium. Rabobank reinforced this bearish production view, cutting its 2025/26 global surplus estimate to 250,000 MT versus its November projection of 328,000 MT.

Nigeria, the world’s fifth-largest cocoa producer, presents additional production headwinds. The Nigerian Cocoa Association projects the 2025/26 harvest will contract -11% year-over-year to 305,000 MT from an anticipated 344,000 MT in 2024/25. September cocoa shipments from Nigeria remained flat year-over-year at 14,511 MT, offering little relief on the supply front.

Demand Picture Remains Subdued

Counterbalancing the constructive supply narrative, global cocoa demand remains stubbornly weak—a concern for those investing cocoa based on consumption metrics. Third-quarter Asian cocoa grindings (processing volumes) fell -17% year-over-year to 183,413 MT, marking the smallest Q3 output in nine years. European grindings similarly declined -4.8% year-over-year to 337,353 MT, posting the weakest third quarter in a decade. North American grindings rose +3.2% year-over-year to 112,784 MT, though reporting methodology changes compromised data reliability.

Weather Dynamics Create Mixed Signals

West African weather patterns have presented conflicting implications. Ivorian farmers have benefited from favorable conditions combining rain and sunshine, supporting robust cocoa tree blooming cycles. Ghana’s agricultural zones have similarly experienced consistent rainfall conducive to pod development ahead of the harmattan season. Mondelez reported that current pod counts in West Africa stand 7% above the five-year average and materially exceed prior-year levels, with the main Ivory Coast harvest now underway amid farmer optimism regarding crop quality.

Policy Reprieve Alleviates Deforestation Pressures

Cocoa supply dynamics received temporary relief when the European Parliament approved a one-year delay to the European Union Deforestation Regulation (EUDR) on November 26. This postponement permits EU nations to continue sourcing agricultural commodities from African, Indonesian, and South American regions where deforestation continues, preventing the previously anticipated supply constraints that the regulation would have imposed.

Historical Context: From Deficits to Equilibrium

The backdrop for current price strength becomes clearer when examining recent history. ICCO reported on May 30 that the 2023/24 marketing year closed with a staggering deficit of -494,000 MT—the largest cocoa shortfall in over six decades—reflecting a -12.9% year-over-year production collapse to 4.368 MMT. The current 2024/25 season marks an inflection point, with ICCO’s December 19 estimate projecting the first surplus in four years at 49,000 MT, supported by a +7.4% year-over-year production expansion to 4.69 MMT. For participants investing cocoa through this transition, balancing the structural supply recovery against tepid consumption remains the central investment calculus.