Global Cocoa Market Faces Sustained Pressure as Demand Deteriorates and Nigeria's Production Outlook Weakens

The cocoa market is experiencing a pronounced downturn driven by persistently weak global demand and favorable growing conditions in West Africa that have elevated supply concerns. Recent price movements tell a compelling story: ICE NY cocoa March contracts (CCH26) retreated 6.18% with a loss of 276 points, while London’s March cocoa #7 (CAH26) declined 6.57%, shedding 211 points. This marks the third consecutive week of losses, with New York prices sliding to their lowest level in two years and London cocoa reaching a 2.25-year trough.

Demand Contraction Across Major Consuming Regions

The underlying weakness in cocoa prices stems from subdued consumption activity across global markets. Barry Callebaut AG, the world’s largest supplier of industrial chocolate products, revealed that its cocoa division experienced a significant 22% year-over-year sales contraction during the quarter ending November 30. The Swiss-based manufacturer attributed this decline to diminished market appetite and strategic repositioning toward higher-margin cocoa segments, signaling broader consumer hesitation driven by elevated chocolate costs.

European cocoa processors have felt the impact particularly sharply. The European Cocoa Association reported that Q4 cocoa grindings—a key demand indicator—plummeted 8.3% year-over-year to 304,470 metric tons, substantially surpassing the anticipated 2.9% decline and marking the lowest fourth-quarter figure in over a decade. Asian grindings similarly softened, declining 4.8% year-over-year to 197,022 metric tons, according to the Cocoa Association of Asia, while North America’s grinding activity barely moved, rising just 0.3% to 103,117 metric tons.

Nigeria Production Challenges Shape Supply Dynamics

Nigeria, positioned as the world’s fifth-largest cocoa producer, is emerging as a critical concern for the supply outlook. The nation’s cocoa shipments have deteriorated significantly, with November exports falling 7% year-over-year to reach 35,203 metric tons. More concerning is the production trajectory: Nigeria’s Cocoa Association has forecasted that output for the 2025/26 season will decline by 11% to 305,000 metric tons, down sharply from the projected 344,000 metric tons for the current 2024/25 season.

In contrast, Ivory Coast—the planet’s top cocoa producer—shipped 1.16 million metric tons from October through mid-January, representing a 3.3% year-over-year decrease. Despite this slight reduction, Ivory Coast’s harvest outlook remains relatively stable compared to Nigeria’s projected contraction. Improved weather patterns in West Africa are expected to support February-March pod collection, with industry observers noting that pod counts are approximately 7% above the five-year historical average, though farmers remain optimistic about quality improvements.

Inventory Dynamics and Global Supply Reassessment

ICE-monitored cocoa warehouse stocks in United States ports have rebounded from their December 26 low of 1,626,105 bags to a two-month peak of 1,752,451 bags in late January—a movement that traders interpret as bearish for sustained price recovery. Meanwhile, the International Cocoa Organization has substantially revised its market projections. The ICCO reduced its global cocoa surplus estimate for 2024/25 to just 49,000 metric tons, down dramatically from a previous projection of 142,000 metric tons, while simultaneously lowering its production forecast for the season to 4.69 million metric tons from an earlier estimate of 4.84 million metric tons.

Global inventories for 2024/25 have expanded 4.2% year-over-year to 1.1 million metric tons, applying additional downward pressure. Rabobank’s analysis projects an even tighter picture for 2025/26, reducing its global surplus estimate to 250,000 metric tons from a prior forecast of 328,000 metric tons, suggesting that supply constraints will gradually reassert themselves.

Policy Developments and Market Structure

In late November, the European Parliament approved a one-year postponement of its deforestation regulation (EUDR), which targets supply-chain compliance for commodities including cocoa. The reprieve allows continued imports from African, Indonesian, and South American regions where deforestation concerns persist, effectively supporting continued cocoa availability in the near term.

The structural transition underway in the cocoa market reflects a shift from the historic 2023/24 deficit environment. The ICCO previously documented a record cocoa deficit of 494,000 metric tons for 2023/24—the most severe shortfall in over sixty years—driven by a 12.9% year-over-year production decline to 4.368 million metric tons. However, the trajectory has reversed: 2024/25 is now projected to deliver the first global surplus in four years, with production rising 7.4% to 4.69 million metric tons, a development that continues to weigh on sentiment even as Nigeria’s production challenges inject some uncertainty into the longer-term outlook.