Cocoa Supply Tightens: Here's Why Cocoa Price Momentum Is Building

West African cocoa shipments paint a critical picture for the global market. Ivory Coast, the world’s leading cocoa producer, has delivered just 1.073 million metric tons (MMT) to ports during the October-January period—a 3.3% decline versus the same window last year. This supply squeeze is translating directly into trading action: March ICE NY cocoa futures surged +181 points (+3.08%), while March ICE London cocoa climbed +109 points (+2.57%).

The tightening comes as structural shifts reshape cocoa price dynamics. The International Cocoa Organization (ICCO) has dramatically slashed its 2024/25 global surplus projection to just 49,000 MT, down from an earlier forecast of 142,000 MT. Global production estimates fell to 4.69 MMT from 4.84 MMT, marking the first surplus in four years after four years of deficits. Meanwhile, inventory cushions are eroding—US port stocks hit a 9.5-month low of 1.63 million bags in late December.

The Bloomberg Effect and Index Demand

A key catalyst amplifying cocoa price momentum: Bloomberg is adding cocoa futures to its Commodity Index (BCOM) this month. Citigroup analysts project this inclusion could trigger as much as $2 billion in index-related purchases of NY cocoa futures, creating additional buying pressure beyond fundamental supply constraints.

Demand Weakens Even as Supply Tightens

Yet demand remains a constraint. Asian cocoa grindings cratered 17% year-over-year in Q3 to 183,413 MT—the smallest Q3 output in nine years. European grindings slipped 4.8% y/y to 337,353 MT, marking a decade-low for third quarters. North American grindings edged up 3.2%, though accounting changes muddied the data. These weakness signals suggest cocoa price strength may be more supply-driven than demand-led.

Nigeria’s Production Cliff Adds Pressure

Nigeria, the world’s fifth-largest cocoa producer, presents another headwind for global supply. The Nigerian Cocoa Association projects 2025/26 output will plunge 11% to 305,000 MT from 344,000 MT, reducing a critical source of global cocoa supply.

The Downside Risk: Deforestation Law Delay

One factor pressuring cocoa price upside: the European Parliament in November approved a 1-year delay to the EU’s deforestation regulation (EUDR). By pushing back enforcement, the delay maintains access to West African, Indonesian, and South American cocoa from deforestation-prone regions, potentially easing supply concerns and capping cocoa price rallies.

Positive harvest reports from Ivory Coast and Ghana—with pod counts running 7% above the five-year average—suggest the spring harvest could deliver relief if grower optimism translates to larger yields.