Cocoa Prices Stage Comeback: West African Producers Curtain Supply Flows Amid Market Rebound

Cocoa futures reversed course on Monday, demonstrating resilience after experiencing a brutal two-week selloff that had pushed New York cocoa futures to a 2-year low and London cocoa to a 2.25-year low. March ICE NY cocoa closed up 147 points (+3.50%) while March ICE London cocoa rallied 73 points (+2.43%), signaling renewed buying interest in a market where producers have begun strategically holding back supplies in response to depressed pricing levels.

The recovery came as multiple market forces aligned to provide support. Dollar weakness created a favorable tailwind for dollar-denominated commodity prices, while West African producers—facing unsustainably low prices—have opted to curtain their export flows, effectively tying back the supply surge that had weighed on markets. This supply management strategy represents a critical juncture where producers are attempting to stabilize a market plagued by weak demand and oversupply concerns.

Market Dynamics: The Supply Constraint Story

West African cocoa supplies have become the market’s critical variable. Ivory Coast, the world’s largest cocoa producer, shipped only 1.20 MMT of cocoa to ports during the current marketing year (October 1, 2025 through January 25, 2026), representing a 3.2% decline from 1.24 MMT in the comparable period a year prior. This pullback reflects deliberate supply management as farmers attempt to preserve profit margins amid falling prices.

Nigeria, the world’s fifth-largest cocoa producer, faced its own supply challenges. November exports plummeted 7% year-over-year to just 35,203 MT, with Nigeria’s Cocoa Association projecting a concerning 11% production decline for the 2025/26 crop year to 305,000 MT (down from 344,000 MT anticipated for 2024/25). These supply disruptions have emerged as a bullish counterweight to demand weakness, though they stem from economic rationality rather than supply shocks.

The Demand Problem: Global Chocolate Sector Under Pressure

Despite supply constraints, demand weakness remains the dominant headwind. The global chocolate and cocoa-processing industry continues to struggle with consumer resistance to elevated chocolate prices. Barry Callebaut AG, the world’s largest bulk chocolate manufacturer, reported a startling 22% decline in sales volume within its cocoa division for the quarter ending November 30. The company attributed this collapse to “negative market demand and prioritization of volume toward higher-return segments within cocoa,” indicating systematic shifts away from traditional cocoa products.

Grinding reports—the key metric for actual chocolate production—have painted an increasingly bleak picture:

• European Cocoa Grindings (Q4): Fell 8.3% year-over-year to 304,470 MT on December 15, exceeding the downside estimate of -2.9% and marking the lowest Q4 performance in 12 years
• Asian Cocoa Grindings (Q4): Contracted 4.8% year-over-year to 197,022 MT as reported on December 16
• North American Cocoa Grindings (Q4): Barely stabilized with just a 0.3% year-over-year increase to 103,117 MT

This synchronized demand collapse across all major consuming regions underscores a structural issue: consumer price sensitivity has fundamentally altered purchasing behavior. Manufacturers and retailers cannot simply pass elevated cocoa costs to consumers without triggering volume destruction.

Inventory Contradictions: The Bearer of Mixed Signals

Paradoxically, while supply constraints support prices, inventory dynamics present bearish implications. ICE-monitored cocoa stocks held at US ports have rebounded significantly from their December 26 low of 1,626,105 bags, climbing to a 2-month high of 1,752,451 bags by Thursday. This inventory recovery, despite production cutbacks, reflects the reality that previous years’ supplies continue to weigh on near-term market sentiment—a factor that could eventually curtail upside potential.

The inventory situation reflects a critical mismatch: while current production faces constraints, pipeline inventory from higher-yielding seasons past continues to suppress price momentum despite producers’ attempts to tie back shipments.

Supply Abundance Versus Production Concerns

West Africa’s growing conditions present another complex layer. Tropical General Investments Group recently noted that favorable growing conditions are expected to boost the February-March cocoa harvest in Ivory Coast and Ghana, with farmers reporting larger and healthier pods compared to the previous year. Mondelez similarly noted that pod counts in West Africa currently stand 7% above the five-year average and “materially higher” than prior year levels.

This surplus of healthy pods seemingly contradicts the production decline from Nigeria and the export pullback from Ivory Coast, but the disconnect explains itself: favorable conditions support production potential, yet economic rationality—driven by price levels—motivates producers to withhold supplies. The Ivory Coast’s main crop harvest has commenced, but farmer optimism about quality cannot overcome the reality of deteriorating economics.

The Historical Context: Record Swings in Supply Balance

Understanding current market dynamics requires historical perspective. The International Cocoa Organization (ICCO) revealed in May 2024 that 2023/24 represented an unprecedented cocoa deficit of -494,000 MT—the largest in over 60 years. That year saw global cocoa production plunge 12.9% year-over-year to 4.368 MMT, creating supply urgency that supported prices despite demand weakness.

The market has since pivoted dramatically. By December 19, ICCO reported that 2024/25 would likely produce a 49,000 MT surplus, marking the first surplus in four years. Global production surged 7.4% year-over-year to 4.69 MMT. However, ICCO’s November 28 report had modestly adjusted this forecast downward to 49,000 MT from an earlier estimate of 142,000 MT, indicating growing uncertainty.

Rabobank further tempered expectations, cutting its 2025/26 global cocoa surplus estimate to 250,000 MT on December from an earlier November forecast of 328,000 MT. These successive downward revisions suggest the market is beginning to price in supply constraints that will emerge as producers actively withhold supplies and weather patterns potentially shift.

The Road Ahead: Managing Competing Pressures

The cocoa market sits at an inflection point. Price recovery is supporting a modest rebound, yet multiple headwinds remain. Demand fundamentals remain impaired, with chocolate manufacturers and retailers unable to push consumption upward despite moderate price relief. Supply-side constraints from Nigeria and producer hold-backs from Ivory Coast provide some support, yet excess inventory in logistics pipelines and the possibility of record-setting production in West Africa in coming months create downside risks.

For the market to sustain its rebound, either demand must demonstrate genuine recovery or supply constraints must prove more severe than currently anticipated. The curtain on this market’s next chapter will be drawn by how effectively producers manage the balance between holding back supplies to support prices and the volume destruction that continued high prices risk inducing.