Cocoa Rebounds on Supply Tightening, but Demand Weakness Keeps Upside Capped

Futures prices for cocoa staged a recovery in mid-February, with New York ICE contracts gaining momentum as market participants reassess the supply-demand picture. The bounce reflects a combination of factors: slower shipments from top producing regions, technical short covering, and shifting expectations around global stockpiles. However, persistent demand concerns continue to weigh on the broader cocoa complex, suggesting any rally may face headwinds.

West African Shipments Decline, Signaling Tighter Cocoa Supply

The catalyst for this week’s cocoa price surge centers on slowing shipment flows from the Ivory Coast, the world’s leading cocoa producer. Data revealed that cocoa deliveries to Ivorian ports through early February came in below year-ago levels, marking a noticeable deceleration in the pace of farmer sales. This slowdown has triggered buying interest among traders who had taken short positions, creating a technical bounce in futures prices.

The apparent supply tightness contrasts sharply with the global abundance that has dominated cocoa markets for months. International forecasters have revised their supply balance sheets, with StoneX and other analysts adjusting surplus estimates downward for the 2025/26 and 2026/27 seasons. These projections now point toward a less oversupplied cocoa market than previously expected, even as global stockpiles remain elevated at levels not seen in years.

Chocolate Demand Remains Under Pressure Despite Price Pullback

The cocoa market’s ability to sustain higher prices faces a significant obstacle: anemic end-user demand. Barry Callebaut, which handles bulk cocoa for the world’s largest chocolate manufacturers, reported a sharp decline in sales volumes for its cocoa division in late 2025, directly attributing weakness to consumer resistance against elevated chocolate prices. This demand destruction has cascaded through the supply chain.

Regional cocoa grinding data—a key indicator of chocolate production activity—tell a troubling story. European processors logged their weakest quarterly cocoa usage in over a decade, while Asian grindings also contracted year-over-year. North American cocoa demand showed only marginal improvement, suggesting that the global chocolate sector remains under structural pressure. As long as consumer purchasing power remains subdued, any cocoa-price rebound risks triggering further demand destruction.

Inventory Rebound and Favorable Weather Cloud the Outlook

Complicating the cocoa bull case are rising inventories held at U.S. ports. After hitting multi-month lows in late December, cocoa stocks have been rebuilding steadily and recently reached their highest levels in months. This inventory normalization typically exerts downward pressure on futures prices by easing near-term supply concerns.

Simultaneously, weather conditions in West Africa are shaping up favorably for the upcoming harvest season. Farmers in the Ivory Coast and Ghana are reporting healthier cocoa pods and larger yields compared to the prior year, with industry observers noting pod counts above their five-year average. Such a scenario could lead to a surge in cocoa supplies reaching ports over the coming weeks, potentially undercutting the recent price strength.

Mixed Signals from Smaller Producers Paint Incomplete Picture

Regional supply dynamics add another layer to the cocoa outlook. Nigeria, the fifth-largest cocoa producer, is experiencing a production contraction, with export volumes sliding and industry projections calling for a significant drop in the 2025/26 cocoa crop. This tightening from secondary origins provides some price support, but it remains insufficient to offset the structural headwinds facing the global cocoa market.

Looking ahead, the cocoa complex faces a tug-of-war between improving supply conditions and deteriorating demand fundamentals. While the pullback in Ivorian shipments and production challenges in Nigeria may support prices near-term, chocolate makers’ demand destruction and rising port inventories could reassert selling pressure on any attempted cocoa rally. Market participants should monitor cocoa shipment flows and regional production updates closely, as these factors will likely determine whether this price bounce proves durable or represents merely a technical correction within a broader downtrend.