Cacao Market Under Pressure as Supply Glut Outpaces Weakening Demand

As of early March 2026, cacao futures are showing continued weakness with March ICE NY cocoa down 22 points (-0.52%) and March ICE London cocoa declining 18 points (-0.59%). The bearish sentiment stems from a fundamental supply-demand imbalance that presents both risks and opportunities for cacao ETF investors. Last week, both New York and London cocoa futures hit multi-year lows—NY cocoa reached its lowest point in 2.25 years while London cocoa sank to a 2.5-year low, reflecting persistent pressure from abundant global supplies and subdued consumer interest.

Global Oversupply Extends Into 2026-27

The supply situation shows no signs of easing. StoneX forecasted a global cacao surplus of 287,000 metric tons (MT) for the 2025/26 season, with an even larger 267,000 MT surplus projected for 2026/27. The International Cocoa Organization (ICCO) reported in late January that global cacao stocks climbed 4.2% year-over-year to 1.1 million MT, indicating mounting inventory pressure. This surplus dynamic directly impacts cacao ETF valuations, as commodity ETFs tracking physical cacao futures typically move inversely to price levels—meaning lower prices benefit cacao short funds while pressuring bullish cacao positions.

For context, ICCO had previously estimated a record deficit of -494,000 MT in 2023/24 (the largest in over 60 years), but production rebounded strongly in 2024/25 with output rising 7.4% year-over-year to 4.69 MMT, creating the current oversupply conditions.

Demand Weakness Accelerates Price Decline

Consumer resistance to elevated chocolate prices has emerged as a critical demand destroyer. Barry Callebaut AG, the world’s largest bulk chocolate manufacturer, reported a striking 22% decline in cocoa division sales volume for the quarter ending November 30, 2025, attributing the drop to “negative market demand and prioritization of higher-return segments.” This data point signals structural weakness rather than temporary softness.

Grinding reports reinforce the demand deterioration. European cocoa grindings fell 8.3% year-over-year in Q4 2025 to 304,470 MT—both worse than the forecasted -2.9% decline and marking the weakest fourth quarter in 12 years. Asian grindings contracted 4.8% year-over-year to 197,022 MT in the same period. North American grindings showed only marginal growth of 0.3% year-over-year, reaching 103,117 MT. These grinding figures are critical indicators because they reflect actual chocolate maker purchasing patterns and directly influence cacao ETF demand.

Inventory Buildup and Port Dynamics

ICE-monitored cacao inventories held in US ports climbed to a 2.75-month high of 1,793,547 bags by late February, a bearish development following the 10.5-month low of 1,626,105 bags recorded in late December. Rising inventory levels typically pressure commodity prices as they signal ample supply readily available for delivery—a headwind for cacao ETF holders carrying long positions.

Conversely, shipments from Ivory Coast, the world’s largest cacao producer, have slowed. Cumulative cocoa shipments from Ivory Coast farmers through early February totaled 1.23 million MT for the current marketing year (October 2025 through February 2026), down 4.7% from 1.24 million MT in the prior-year period. However, favorable West African growing conditions threaten to amplify production. Chocolate maker Mondelez reported that current cacao pod counts in West Africa are 7% above the five-year average and “materially higher” than last year’s crop, suggesting a potentially robust harvest ahead.

Production Shifts Across Major Origins

Nigeria, the world’s fifth-largest cacao producer, presents a contrasting picture. Nigerian cacao exports fell 7% year-over-year in November 2025 to 35,203 MT, and the Nigerian Cocoa Association projects 2025/26 production will decline 11% year-over-year to 305,000 MT from 344,000 MT in 2024/25. Reduced supplies from Nigeria provide modest price support, but this cannot offset the massive oversupply from Ivory Coast and other origins.

Investment Implications for Cacao ETF Traders

The extended supply surplus and structural demand weakness create a challenging environment for bullish cacao ETF positions. Rabobank recently cut its 2025/26 global surplus estimate to 250,000 MT from a prior forecast of 328,000 MT, suggesting some eventual market tightening, yet current data points to persistent near-term pressure. Traders monitoring cacao ETFs should watch for potential support from reduced Nigerian production and West African shipment timing, but the fundamental backdrop remains decidedly bearish as long as the global surplus persists and consumer demand remains suppressed by high chocolate prices.