Cocoa Market Rebounds on Weakening Dollar Amid Oversupply Pressures

Cocoa futures staged a significant recovery on Friday as currency movements reinvigorated technical buying across the commodity complex. March ICE New York cocoa advanced 112 points (+3.77%) while March ICE London cocoa gained 133 points (+6.25%), marking the first substantial rally following a relentless six-week selloff that had driven prices to their lowest levels in nearly three years. The rebound came as the U.S. Dollar Index retreated, encouraging short-covering in futures that had become deeply oversold.

However, the Friday bounce masks persistent structural challenges facing the global cocoa market. The commodity remains under pressure from multiple angles as buyers, producers, and consumers all reassess their relationship with a market plagued by weak demand and expanding inventories.

The Supply Glut Reshaping Producer Economics

West Africa’s cocoa farmers face an unprecedented pricing dilemma. International buyers are shying away from official farm-gate prices in the Ivory Coast and Ghana, citing the significant premium these rates command over current global market levels. This reluctance has created a buyer’s strike that is indirectly boosting stored supplies rather than demand.

The data tells a stark story: ICE cocoa inventories soared to a 5.25-month peak of 2,087,755 bags during the week, reflecting the disconnect between asking prices and market-clearing levels. Both major producing nations responded with dramatic pricing concessions. Ghana implemented a nearly 30% reduction in official cocoa prices for the 2025/26 growing season, while the Ivory Coast signaled it would consider a 35% cut for mid-crop deliveries beginning in April. These price reductions underscore the urgency producers feel in clearing their merchandise.

Major forecasting institutions project continued abundance. StoneX anticipated a 287,000 MT global cocoa surplus for 2025/26 and 267,000 MT for 2026/27. The International Cocoa Organization reported that global stocks expanded 4.2% year-over-year to 1.1 million metric tons. For 2024/25, ICCO documented the first surplus in four years at 49,000 MT, alongside production growth of 7.4% year-over-year reaching 4.69 MMT globally.

Cocoa Demand Erosion Continues Unabated

Perhaps the most troubling development for cocoa suppliers is the persistent collapse in end-use demand. Consumers are demonstrably voting with their wallets against elevated chocolate prices, forcing manufacturers to reduce production or shift toward higher-margin segments.

Barry Callebaut, the world’s largest cocoa processor and bulk chocolate manufacturer, reported a concerning 22% plunge in sales volume within its cocoa division during the quarter ending November 30. The company specifically cited “negative market demand and a prioritization of volume toward higher-return segments,” signaling that chocolate confections have lost their appeal at current price levels.

Industry grinding reports validate this demand deterioration across all major consuming regions. European cocoa processors reduced grindings by 8.3% year-over-year in Q4 to 304,470 MT—a steeper decline than the expected 2.9% drop and the weakest fourth-quarter performance in a dozen years. Asian processors similarly contracted with Q4 grindings falling 4.8% year-over-year to 197,022 MT. North American processors showed marginal resilience with only +0.3% growth to 103,117 MT, suggesting stagnation across the Atlantic.

Production Tailwinds May Be Temporary

West African growing conditions are paradoxically working against price stability. Tropical General Investments Group reports that optimal climate conditions are expected to support both February and March harvests across the Ivory Coast and Ghana, with farmers documenting larger, healthier cocoa pods relative to the prior-year comparison. Mondelez noted that current pod counts in West Africa are running 7% above their five-year average and materially exceed last year’s crop performance.

The Ivory Coast’s main crop harvest is progressing smoothly, and farmer sentiment remains constructive regarding quality. Complicating the supply picture further, Nigeria—the world’s fifth-largest cocoa supplier—has accelerated shipments, with December exports rising 17% year-over-year to 54,799 MT according to Bloomberg data.

One modest offsetting factor emerged in Ivory Coast port data. Cumulative cocoa deliveries through mid-February of the 2025/26 marketing year totaled 1.30 MMT, representing a 3.0% decline from the 1.34 MMT shipped in the equivalent prior-year window. Nevertheless, this incremental support fails to offset the broader supply expansion.

The silver lining for cocoa remains limited on the supply side. Nigeria’s Cocoa Association projects that Nigerian production will contract 11% year-over-year in 2025/26 to 305,000 MT from an estimated 344,000 MT in the prior season. Even so, aggregate global supply is expected to remain ample, as Rabobank recently trimmed its 2025/26 cocoa surplus forecast to 250,000 MT from a prior estimate of 328,000 MT—still indicating substantial excess inventory accumulation ahead.

The cocoa market faces a delicate balance between short-term technical relief and long-term fundamental pressures that continue limiting price recovery potential.