Cocoa Futures Rally Amid Tighter Supply Outlook and Reduced Port Deliveries from Top Producer

Cocoa is extending gains as market participants digest a confluence of bullish supply-side indicators. March ICE NY cocoa surged +181 points (+3.08%), while March ICE London cocoa #7 climbed +109 points (+2.57%) on mounting evidence of constrained global supplies entering the new year.

Supply Pressure Builds from Ivory Coast Slowdown

Ivory Coast shipments paint a picture of tightened availability. Through January 4 of the current marketing year, the world’s largest cocoa producer has shipped 1.073 million metric tons to ports—a 3.3% decline versus the 1.11 MMT delivered during the same window last year. This slowdown is reverberating through futures markets as traders reassess inventory levels and forward purchasing patterns.

The dynamics extend beyond port data. Nigeria, ranked fifth globally in cocoa production, faces its own headwinds. The country’s Cocoa Association projects 2025/26 production will contract 11% year-over-year to 305,000 MT, down from an expected 344,000 MT this season. September export volumes held flat annually at 14,511 MT, signaling production strains rather than robust supply momentum.

Inventory Contraction Supporting the Rally

Physical cocoa availability metrics are reinforcing the price rally. ICE-monitored US port inventories fell to a 9.5-month trough of 1,626,105 bags on December 26, indicating dealers and processors are drawing down reserves. This inventory compression typically precedes sustained price appreciation when combined with demand considerations.

Index Inclusion as a Fresh Catalyst

Underlying cocoa prices is anticipated institutional buying tied to the Bloomberg Commodity Index expansion. Cocoa futures were added to the BCOM starting this month, with Citigroup estimating the inclusion could attract approximately $2 billion of NY cocoa futures purchases. This mechanical buying provides a structural bid beneath spot prices.

Mixed Demand Picture Restrains Rally Scope

Countering supply tightness, cocoa grinding activity in consuming regions shows concerning trends. Asia’s Q3 cocoa grindings collapsed 17% year-over-year to 183,413 MT—the weakest third-quarter performance in 9 years. European grindings fell 4.8% year-over-year to 337,353 MT, marking the lowest Q3 result in a decade. North American grindings rose 3.2% year-over-year to 112,784 MT, though revised reporting methodologies distort the comparison.

Production Outlook Revisited

The International Cocoa Organization has substantially repriced its global balance sheet. In November, ICCO slashed its 2024/25 surplus estimate to 49,000 MT from a prior 142,000 MT projection and lowered production guidance to 4.69 MMT from 4.84 MMT. This represents a dramatic tightening from earlier assumptions. Rabobank similarly trimmed its 2025/26 surplus forecast to 250,000 MT from a November estimate of 328,000 MT, signaling broader market conviction around supply constraints.

ICCO’s December 19 update now sees 2024/25 as the first surplus year in four years, with production rising 7.4% year-over-year to 4.69 MMT—a recovery from the 4.368 MMT recorded in 2023/24, which had produced a record -494,000 MT deficit.

Favorable Crop Conditions Present Headwinds

Last week’s price dip reflected temporary optimism about West African harvests. Tropical General Investments Group noted improved growing conditions supporting larger, healthier pods in Ivory Coast and Ghana for the February-March harvest. Mondelez disclosed that cocoa pod counts across West Africa are running 7% above the five-year average and “materially higher” than last year’s crop, suggesting harvest potential remains robust despite near-term supply tightness.

EU Deforestation Rule Delay Eases Supply Concerns

The European Parliament’s November 26 approval of a one-year delay to the EU Deforestation Regulation (EUDR) removes an intermediate bearish factor. The postponement allows continued agricultural imports from African, Indonesian, and South American regions facing deforestation pressures, preventing supply-side disruptions that the regulation would otherwise have triggered.

Market Takeaway

Cocoa’s advance reflects a genuine tightening in near-term availability set against softer global consumption. The addition to a major commodity index provides institutional tailwinds, while production headwinds in Nigeria and constrained Ivory Coast flows narrow the surplus picture. Investors tracking cocoa should monitor grinding data across regions for cracks in demand resilience.