Market Expectations Shape Cocoa Futures as West African Production Outlook Shifts

Cocoa futures closed on a softer note Thursday as traders reassess supply expectations amid shifting production forecasts from major growing regions. NY ICE cocoa for March delivery dropped 44 points (-0.74%), while London ICE cocoa March contract slid 24 points (-0.55%), pulling prices to their weakest level in a week.

Supply Prospects Turning More Optimistic on Weather Patterns

The primary driver behind Thursday’s pullback centers on expectations of improved cocoa yields across West Africa’s major producing regions. Farmers in the Ivory Coast report that consistent moisture combined with sunshine is triggering robust blooming cycles in cocoa trees. Ghanaian growers have experienced regular precipitation that’s supporting pod formation before the harmattan winds arrive—traditionally a critical development period.

Chocolate manufacturer Mondelez recently highlighted that current pod counts in West Africa stand 7% above the five-year baseline and substantially surpass last year’s harvest levels, pointing toward stronger production potential. The Ivory Coast’s primary crop season has commenced with farmers expressing confidence regarding pod quality metrics.

Expectations for ample supplies received additional weight from the European Parliament’s November 26 decision to delay the deforestation regulation (EUDR) by one year. This extension permits continued imports of agricultural commodities from regions experiencing deforestation pressures, effectively expanding available cocoa supply channels into European markets.

Inventories Create a Counterbalance

Despite the bearish supply narrative, ICE-monitored cocoa stockpiles held in US port facilities contracted to a nine-month floor of 1,642,801 bags on Thursday. This inventory compression has prevented a steeper price decline, offering technical support amid otherwise headwind conditions.

Demand Signals Remain Soft

Global cocoa consumption indicators paint a weaker picture. The Cocoa Association of Asia reported Q3 grindings collapsed 17% year-over-year to 183,413 MT—marking the lowest third-quarter volume in nine years. European cocoa grindings retreated 4.8% annually in Q3 to 337,353 MT, the weakest third quarter in a decade. North American chocolate candy sales volume contracted more than 21% in the 13-week period ending September 7, signaling demand pressures extending beyond commodity grinding rates.

Technical Support from Index Inclusion

A meaningful support factor emerges from NY cocoa’s inclusion in the Bloomberg Commodity Index (BCOM) beginning January. Market expectations suggest this development could catalyze approximately $2 billion in inflows from passive index-tracking funds during the month’s opening week, providing price support during the initial trading period.

Production Shifts in Secondary Regions

Nigeria, the world’s fifth-largest cocoa producer, projects a -11% year-over-year production decline for 2025/26, with expectations for output to fall to 305,000 MT from the prior season’s estimated 344,000 MT. This contraction offsets some supply optimism from West African leaders, though Nigeria’s contribution represents a smaller portion of global supplies.

The supply-demand equilibrium that market participants are currently pricing in reflects expectations for more balanced conditions compared to the severe deficit periods of 2023/24, when global stocks-to-grindings ratios sank to 46-year lows of 27.0%.