Global Cocoa Market Finds Momentum as Index Inclusion Reshapes Price Dynamics

Cocoa futures are experiencing renewed strength in March trading, with ICE NY cocoa climbing +45 points (+0.76%) and London cocoa futures advancing +23 points (+0.80%). The rally reflects a significant structural shift in the market: Bloomberg’s decision to add cocoa to its flagship commodity benchmark starting this year is expected to trigger substantial institutional inflows. Citigroup analysts project that the BCOM inclusion could channel as much as $2 billion into NY cocoa futures contracts, a game-changing development for price support.

Supply Dynamics Tighten Amid Mixed Production Signals

The fundamental backdrop presents a complex picture. Inventory levels in US ports have contracted sharply, hitting a 9.5-month low of 1.64 million bags on Monday—a bullish indicator. However, cocoa arrivals in Ivory Coast ports tell a different story. Recent government data revealed that farmers in the world’s largest cocoa-producing nation shipped 970,945 MT to ports during the new marketing cycle (October 1 through December 21), essentially flat compared to the same window last year, down just 0.1%.

The International Cocoa Organization released a dramatic reassessment on November 28, slashing its 2024/25 global surplus projection from 142,000 MT to just 49,000 MT—a tightening that signals structural support for prices. Production estimates were simultaneously lowered to 4.69 million metric tons from 4.84 MMT. Rabobank reinforced this view on Tuesday, cutting its 2025/26 surplus forecast to 250,000 MT from a prior estimate of 328,000 MT.

Nigeria, the world’s fifth-largest producer, presents a concerning supply picture. The country’s Cocoa Association projects production will contract 11% year-over-year to 305,000 MT in the 2025/26 season, down from 344,000 MT in the current cycle. September exports remained flat at 14,511 MT, suggesting limited near-term supply growth.

Weather and Agricultural Fundamentals Create Headwinds

Despite inventory tightness, weather conditions in West Africa have been remarkably favorable for cocoa trees. A balanced mix of rainfall and sunshine has supported pod development across Ivory Coast and Ghana, with farmers reporting optimal conditions ahead of the harmattan season. Chocolate-maker Mondelez noted that the latest pod count in West Africa sits 7% above the five-year average and significantly exceeds last year’s crop levels—a factor that could eventually pressure prices if realized.

The harvest in Ivory Coast’s main crop region has commenced, and farmer sentiment remains optimistic regarding crop quality, which could indicate adequate supply recovery despite earlier year-to-date shipment weakness.

Demand Weakness Challenges Price Recovery

Consumption metrics paint a cautionary tale. Asia’s cocoa grindings plummeted 17% year-over-year in Q3 to 183,413 MT, marking the lowest third-quarter processing in nine years. European grindings fell 4.8% to 337,353 MT, the weakest Q3 in a decade. While North American grindings rose 3.2% to 112,784 MT, the data was skewed by new reporting participants, limiting analytical reliability.

Retail weakness has been striking: North American chocolate candy sales volume declined over 21% in the 13 weeks ending September 7 compared to the prior year. Hershey’s CEO labeled Halloween chocolate sales this season as “disappointing”—particularly significant given that Halloween represents nearly 18% of annual US candy sales, second only to Christmas spending.

Policy Tailwinds: The Deforestation Regulation Delay

The European Parliament’s November 26 decision to delay implementation of the deforestation law (EUDR) by one year provides near-term price support. The regulation, designed to restrict imports of commodities like cocoa from regions experiencing deforestation, would have constrained African and Indonesian supplies. The postponement allows continued EU imports from these markets, keeping supply channels open and moderating upward pressure on prices.

The Broader Context

The transformation unfolding in cocoa markets reflects the interplay of structural policy changes, commodity financialization through index inclusion, genuine supply tightening, but offset by surprisingly robust agricultural output and depressed chocolate demand. The recent ICCO surplus revision from deficit to the first surplus in four years marked a pivotal reversal, yet the current projection of only 49,000 MT surplus suggests minimal buffer against production or demand disruptions.