Structural Weaknesses in Global Cocoa Markets Continue Despite Dollar Support

The cocoa futures markets are displaying a complex picture of competing pressures. March ICE New York cocoa futures climbed 68 points (+1.56%) while March ICE London cocoa gained just 5 points (+0.16%), a divergence that reveals the multiple weaknesses challenging the global market. The modest advance in New York reflects short covering triggered by a plunge in the dollar index to a 4.25-month low, yet the muted rally in London underscores how different regional factors create distinct market dynamics.

Currency Dynamics and Their Conflicting Impacts on Global Cocoa

The dollar’s recent retreat has provided a technical boost to cocoa futures priced in US dollars, as investors covered short positions in anticipation of further currency weakness. However, this short-term support masks a more complex reality. The British pound’s simultaneous surge to a 4.25-year high creates headwinds for London-priced cocoa, demonstrating how currency fluctuations can work against each other across different trading venues. When converted to sterling terms, the benefits of dollar weakness evaporate, weighing on European market participants’ purchasing power and creating friction between regional markets.

Persistent Demand Weaknesses Across Major Consuming Regions

The fundamental story behind cocoa’s struggles centers on stubborn demand weaknesses across all three major consuming regions. Consumer resistance to elevated chocolate prices remains a significant drag. Barry Callebaut AG, the world’s largest bulk chocolate manufacturer, reported a striking 22% decline in sales volume within its cocoa division for the quarter ending November 30, with management explicitly citing “negative market demand and a prioritization of volume toward higher-return segments.” This signals that price sensitivity among chocolate makers has reached critical levels.

Regional cocoa grinding data reinforces the demand narrative. The European Cocoa Association reported that Q4 European cocoa grindings declined 8.3% year-over-year to 304,470 MT, substantially worse than the anticipated decline of 2.9% and marking the lowest Q4 processing in over a decade. The Cocoa Association of Asia reported Q4 Asian grindings fell 4.8% year-over-year to 197,022 MT. Even North America showed relative weakness, with the National Confectioners Association reporting Q4 grindings rose only 0.3% year-over-year to 103,117 MT. This synchronized weakness across consumption centers demonstrates the structural nature of current demand challenges, revealing that regional differences have narrowed around a consistent theme of price-induced pullback.

Supply Chain Pressures and Regional Production Challenges

West African producers, facing sustained low prices, have responded by restraining their market releases. Cumulative export data from Ivory Coast—the world’s largest cocoa producer—showed 1.20 MMT of cocoa shipped to ports during the marketing year running from October 1, 2025 through January 25, 2026, down 3.2% compared to 1.24 MMT in the same period the prior year. This supply restraint reflects producer frustration with price levels insufficient to justify accelerated sales.

Despite favorable growing conditions in West Africa—with Tropical General Investments Group noting that larger and healthier pods are expected to support the February-March harvest in Ivory Coast and Ghana—the market continues to absorb the damage from supply abundance. Mondelez reported that the latest cocoa pod count in West Africa stands 7% above the five-year average, and “materially higher” than last year’s crop. The harvest optimism stands in contrast with weaknesses in near-term pricing power.

Nigeria, the world’s fifth-largest cocoa producer, presents a different concern. November cocoa exports fell 7% year-over-year to 35,203 MT, signaling emerging supply constraints from an alternative source. More concerning, Nigeria’s Cocoa Association projects that the 2025/26 cocoa production will decline 11% year-over-year to 305,000 MT from the projected 344,000 MT in the current 2024/25 season. This tightening from Nigeria could provide some support to prices later, even as West African abundance limits upside near-term.

Inventory Dynamics and the Delay of Market Rebalancing

ICE-monitored cocoa inventories held in US ports initially bottomed on December 26 at a 10.25-month low of 1,626,105 bags, but have since rebounded to 1,766,142 bags by Monday—a 2.25-month high representing a bearish reversal. This inventory accumulation suggests that the market’s adjustment process is being delayed, preventing the supply tightness that might otherwise support prices more aggressively. Ample US warehouse stocks act as a pressure point restraining price appreciation from supply-side factors.

Global Supply-Demand Rebalancing: From Historic Deficit to Tight Surplus

The macro cocoa market has undergone a dramatic transition in recent years. The International Cocoa Organization revealed on May 30 that the 2023/24 season experienced a global deficit of 494,000 MT—the largest shortfall in over 60 years—driven by a 12.9% year-over-year production decline to 4.368 MMT. This extraordinary deficit had set expectations for continued tightness.

However, the momentum has reversed. ICCO revised its 2024/25 estimate in November, cutting the projected global surplus from 142,000 MT to just 49,000 MT on November 28, though this still marks the first surplus after four consecutive years of deficit conditions. The organization simultaneously adjusted its 2024/25 production estimate upward to 4.69 MMT, representing a 7.4% year-over-year increase. This production rebound, combined with demand weaknesses, has fundamentally altered the supply-demand calculus.

Rabobank reinforced this view last Tuesday, reducing its 2025/26 global cocoa surplus estimate to 250,000 MT from a prior November forecast of 328,000 MT. Even with the downward revision, the trajectory suggests that market tightness will not return quickly. The shift from historic deficit to modest surplus reflects the working through of supply constraints and the emergence of demand challenges—fundamental weaknesses that pricing alone has not yet corrected.

The cocoa market faces a period of adjustment as multiple structural pressures converge. Dollar weakness provides temporary technical support, yet underlying demand weaknesses, ample regional inventory, and a transitioning supply environment suggest that price support will remain contested. The market will need to resolve whether emerging supply constraints from Nigeria and favorable West African harvest prospects can overcome the persistent demand challenges and inventory pressures now evident across all major consuming regions.